---

Exhibit 99.2

|MANAGEMENTS DISCUSSION AND ANALYSIS For the years
    ended December 31, 2013 and 2012
|---------------------------------------------------------------------------------------
|                                                                                       

The following Managements Discussion and Analysis
(MD&A) for Timmins Gold Corp. together with its wholly owned subsidiaries
(Timmins or the Company) is prepared as of March 6, 2014 and relates to the
financial condition and results of operations for the years ended December 31,
2013 and 2012. Past performance may not be indicative of future performance.
This MD&A should be read in conjunction with the audited consolidated
financial statements (consolidated financial statements) and related notes for
the years ended December 31, 2013 and 2012 which have been prepared using
accounting consistent with International Financial Reporting Standards as issued
by the International Accounting Standards Board (IFRS or GAAP).

The first, second, third and fourth quarters of the
Companys fiscal years are referred to as Q1, Q2, Q3 and Q4,
respectively. The years ended December 31, 2013 and 2012 are also referred to as
YTD 2013 and YTD 2012, respectively.All amounts are presented in United
States dollars, the Companys presentation currency, unless otherwise stated.
References to C$ and MXP are to Canadian dollars and Mexican pesos,
respectively.

Statements are subject to the risks and uncertainties
identified in the Risks and Uncertainties, Cautionary Note to U.S. Investors
and Cautionary Note Regarding Forward-Looking Statements sections of this
document. The Company has included the non-GAAP performance measures of cash
cost per gold ounce on a by-product basis, all-in sustaining cash cost per gold
ounce on a by-product basis, adjusted earnings and total comprehensive income
and adjusted earnings per share throughout this document. For further
information and detailed calculations of these measures, see the Non-GAAP and
additional GAAP Measures section of this document.

|2013
      HIGHLIGHTS
|---------------------
|                     
|                    
|                     
|                    
|                     
|                    
|                     
|                    
|                     
|                    
|                     
|                    
|                     
|                    

1

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|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

| | The Companys cash cost per ounce on a by-product basis was $717 (all-in
  sustaining cash cost per ounce on a by- product basis - $872), compared to
  $703 (all-in sustaining cash cost per ounce on a by-product basis - $997)
  during YTD 2012. This increase in cash costs is primarily driven by lower
  grades realized in the year of 0.82 grams of gold per tonne (g/t Au),
  compared to the prior year 0.85 g/t Au. In addition, due to changes in
  accounting methods caused by the drop in gold price during 2013, the inclusion
  of approximately 25% of the mining costs associated with the unprocessed ore
  stockpile resulted in a $7 per ounce increase to the cash cost per ounce.
  These increases are partially offset by cost reduction initiatives.                                                                                                                                                                                                                                
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | During July 2013, the Company announced postponing the installation of a
  new crushing circuit and the commencement of La Chicharra operations until a
  new mine plan had been produced. As a result, during August 2013, the Company
  entered into an agreement with an equipment supplier (the Supplier) to
  finance the remaining portion of previously purchased crushing equipment
  totalling $4.9 million (excluding VAT) of which the Company had previously
  paid $1.5 million (excluding VAT). The financing agreement carries an annual
  interest rate of 7.2% and the original balance of $3.4 million (excluding VAT)
  is payable in 36 monthly instalments, which include equal principal repayments
  of $0.1 million.                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | During December 2013, the 2014 Tax Reform (the Tax Reform), published in
  Mexicos official gazette, created a 7.5% Special
  Mining Duty (SMD) and a 0.5% Extraordinary Mining Duty (EMD). The Company
  has taken the position that the SMD is an income tax under International
  Accounting Standard 12  Income Taxes(IAS 12), as it is calculated
  based on a form of earnings before income taxes less certain specified costs.
  The EMD is a calculation based on gross revenues and is therefore not
  considered an income tax. Both the SMD and EMD will be deductible for income
  tax purposes. As a result of these changes being enacted in 2013, the Company
  recognized a one-time non-cash deferred income tax expense of $8.6 million due
  to the future income tax impact of the SMD. Also, there will no longer be a
  gradual rate reduction as enacted in 2012, the income tax rate for 2014 and
  thereafter will remain at 30%. These changes are effective January 1, 2014.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | During December 2013, the Company renegotiated the terms of the loan
  facility, extending the maturity date to December 31, 2014 with an interest
  rate of 9% per annum. As part of the renegotiated terms, the lender received
  300,000 common shares with a fair value  at the date of issuance totalling C$0.5 million
  ($0.4 million). These common shares were issued in January 2014 and
  have a four month holding period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | During December 2013, the Company published an updated reserves and resources and mine plan in a National Instrument 43-101 (“NI 43-101”) technical report. The new mine plan extends the estimated mine life based on reserves to 2022. The new estimate contains mineral reserves, which are part of the mineral resources, of 1,589,000 proven and probable ounces, mineral resources of 1,868,000 measured and indicated ounces and 1,782,000 inferred ounces. This represents an increase of 19%, 19% and 32%, respectively, over the previous resource estimate update released March 14, 2012 of 1,330,000 ounces, 1,575,000 ounces and 1,351,000 ounces, respectively. Additional details are provided in the “Gold Property – Resource Review” section.                                                                                                                                                                                                                                                  

|RECENT
      DEVELOPMENTS
|-------------------------

| | On February 11, 2014 the Company closed a bought deal financing which
  generated gross proceeds of C$28.4 million ($25.8 million) on issuance of 18,920,000
  common shares of the Company.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                             
| | During January and February 2014, the Company received a total of $3.1
  million of its VAT receivable at December 31, 2013.                                                                
|  |                                                                                                                                                                                             
| | On February 28, 2014, the Company repaid C$5.0 million
    ($4.5 million) in principal of the
    C$18.0 million ($16.4 million) loan facility outstanding at December 31,
    2013.        

|OVERVIEW OF THE
      BUSINESS
|------------------------------

Timmins Gold Corp. is a publicly traded gold producer engaged
in the operation, development, exploration and acquisition of resource
properties in Mexico. The Company owns and operates the San Francisco open pit
gold mine (the Mine) in the state of Sonora, Mexico. The Mine and the La
Chicharra pit are collectively known as the Gold Property. The Company has title
to approximately 200,000 hectares of exploration claims in and around the Gold
Property.

2

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|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

The Company also has title to the TIM claims located in the
state of Zacatecas, Mexico. The Company has also entered into a property option
agreement to earn an interest in the San Onesimo mineral concessions located in
the state of Zacatecas, Mexico. The Company also has title to the Santa Maria
del Oro claim in the state of Jalisco, as well as 40,000 hectares in the state
of Nayarit, Mexico for the El Capomo property.

The Companys common shares are listed on the TSX (TMM) and the
NYSE MKT (TGD). Further details on Timmins Gold Corp. can be found in the
Companys associated documents, including its Annual Information Form, at
www.sedar.com or on the Companys website at www.timminsgold.com.

|OUTLOOK
|-------

The Companys immediate growth strategy is to produce between
115,000 and 125,000 gold ounces annually and to achieve cash cost guidance of
approximately $800 per gold ounce. A resource/reserve update and new mine plan
which incorporates the results of over 150,000 metres of drilling in and around
the Mine was published on December 24, 2013. The new mine plan discloses the
forecast for the Mine on a going forward basis.

Growth initiatives are expected to be financed by internal cash
flow generated from the operations at the Gold Property. Reductions of costs and
deferrals of expenditures at the Gold Property have been implemented in areas
including capital expenditures, exploration and general and administrative
expenses.

|REVIEW OF
    ANNUAL FINANCIAL RESULTS
|--------------------------------------

|                                              |   | Year ended   |  |   | Year ended   |  |   | Nine months ended | 
|--------------------------------------------- | - | ------------ |  | - | ------------ |  | - | ----------------- | 
|                                              |   | December 31, |  |   | December 31, |  |   | December 31,      | 
|                                              |   | 2013         |  |   | 2012         |  |   | 2011              | 
|Gold sold(oz)                                 |   | 118,550      |  |   | 94,128       |  |   | 56,777            | 
|Silver sold(oz)                               |   | 68,512       |  |   | 56,252       |  |   | 28,897            | 
|Average realized gold
      price(per oz)     | $ | 1,358        |  | $ | 1,661        |  | $ | 1,599             | 
|Average London PM fix gold price(per oz)      | $ | 1,411        |  | $ | 1,669        |  | $ | 1,634             | 
|Metal revenues                                | $ | 160,593      |  | $ | 156,192      |  | $ | 90,769            | 
|Earnings from
      operations                | $ | 41,141       |  | $ | 62,938       |  | $ | 36,576            | 
|Earnings and total comprehensive
      income | $ | 15,343       |  | $ | 37,732       |  | $ | 20,874            | 
|Earnings per share                            |   |              |  |   |              |  |   |                   | 
|-Basic                                        | $ | 0.11         |  | $ | 0.26         |  | $ | 0.15              | 
|-Diluted                                      | $ | 0.11         |  | $ | 0.26         |  | $ | 0.15              | 
|Cash flows from operations                    | $ | 52,413       |  | $ | 51,144       |  | $ | 25,304            | 
|Cash dividends
      declared                 | $ | Nil          |  | $ | Nil          |  | $ | Nil               | 
|Total assets                                  | $ | 268,514      |  | $ | 217,647      |  | $ | 160,235           | 
|Total long-term liabilities                   | $ | 57,721       |  | $ | 33,712       |  | $ | 25,199            | 

YTD 2013 Results

Earnings for the Company decreased to $15.3 million for YTD
2013, compared to $37.7 million for YTD 2012 as a result of the following
factors:

3

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Metal revenues

The Company sold 118,550 gold ounces at an average realized gold price of $1,358 per ounce, compared to sales of 94,128 gold ounces at an average realized gold price of $1,661 per ounce during YTD 2012. This represents an increase of 26% in
gold ounces sold and a decrease of 18% in realized gold price over YTD 2012.

Total metal revenues from mining operations were $160.6 million, compared to $156.2 million during YTD 2012. The average London PM Fix price was $1,411 per gold ounce, compared to $1,669 per gold ounce during YTD 2012. This
represents a 15% decrease over YTD 2012.

Cost of sales

Production costs, which comprise the full cost of operations less depreciation and depletion, form a component of cost of sales and were $86.4 million, compared to $67.9 million during YTD 2012. This increase is substantially attributed to
the increased number of gold ounces sold. Due to the reduced gold price during YTD 2013, the Company included in production costs $0.8 million of mining costs associated with stockpiling. These mining costs represent the portion of total mining
costs related to the ore stockpiled which are greater than the net realizable value (“NRV”) of such stockpiled ore.

Depletion and depreciation costs form a component of cost of sales and were $15.5 million, compared to $9.4 million during YTD 2012. This resulted from the increased number of gold ounces sold in addition to the impact of a higher cost base
of mineral properties, plant and equipment on hand, due to capital additions in the periods since December 31, 2012. Offsetting these increases to depletion and depreciation was an increased reserve base as disclosed in the released NI 43-101
published December 24, 2013.

Impairment of non-current unprocessed ore stockpile

Due to the drop in long-term gold price during 2013, an impairment assessment was required in order to determine whether the NRV of the unprocessed ore stockpile was less than the total expected costs to process it. As a result of this impairment
assessment, an impairment charge of $6.3 million was recognized during YTD
2013 against the net book value of the non-current unprocessed ore stockpile,
compared to $nil during YTD 2012.

Corporate and administrative expenses

Corporate and administrative expenses decreased to $11.2 million, compared to $16.0 million during YTD 2012. Share-based payments form a component of the corporate and administrative expenses and decreased to $0.8 million from $6.1
million during YTD 2012. This decrease is a direct result of nearly all previously granted options having been vested by the end of YTD 2013. Salaries increased to $4.3 million, compared to $3.4 million during YTD 2012 partially due to
severance payments, while consulting and professional fees decreased to $2.0 million, compared to $2.8 million during YTD 2012 as a result of fewer consulting companies working
with the Company combined with reduced professional fees.

Finance expense

Finance expense was $1.7 million, compared to $2.5 million during YTD 2012. The C$18.0 million loan facility with Sprott was originally renegotiated during 2012 to carry a cash interest rate of 8% rather than 12% under the original
terms. In December 2013, the loan facility was renegotiated to carry a cash interest rate of 9%.

Income taxes

Income tax expense was $24.9 million, compared to $21.7 million during YTD 2012. The current tax expense decreased to $3.1 million, from $14.2 million during YTD 2012 due to the decline in gold price since YTD 2012 combined with
accelerated deductions taken on capital expenditures during YTD 2013 as well as currency fluctuations. Deferred tax expense was $21.8 million, compared to $7.6 million during YTD 2012. As a result of the Tax Reform being substantially
enacted during December 2013, temporary differences arose between the book basis of certain assets and liabilities and their tax basis. The Company recognized a one-time non-cash charge of $8.6 million related to the future income tax impacts of the
SMD.

4

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

This deferred tax liability will be drawn down to $nil as a reduction to deferred tax expense over the life of mine as the mine and its related assets are depleted and depreciated. The effective tax rate for YTD 2013 was also impacted by the
non-deductibility of the share-based payments and an increase in unrecognized tax assets of both the Canadian parent and non-operating Mexican subsidiary.

Total assets

The $50.9 million increase in total assets during YTD 2013 is primarily due to increases in exploration and investing activities related to mineral properties, plant and equipment of $43.3 million, and an increase in inventories of $10.7
million partially offset by the decrease in cash of $1.4 million and the decrease in non-current unprocessed ore stockpile of $3.9 million.

Total long-term liabilities

The $24.0 million increase in total long-term liabilities during YTD 2013 is primarily due to increases in deferred income tax of $21.8 million as a combined result of taking accelerated deductions on capital expenses in Mexico for tax
planning purposes and the inclusion of deferred tax on the new SMD. Also incurred during YTD 2013 is long-term equipment financing for $2.1 million and an increase in the provision for site reclamation and closure of $0.3 million due to
revised estimates in the calculation of the provision for site reclamation and closure.

5

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|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

|REVIEW OF
      QUARTERLY FINANCIAL RESULTS
|-------------------------------------------

|                                                |   | Q4     |   |   | Q3     |  |   | Q2     |  |   | Q1     |  |   | Q4     |     |   | Q3     |     |   | Q2     |     |   | Q1     |    
|----------------------------------------------- | - | ------ | - | - | ------ |  | - | ------ |  | - | ------ |  | - | ------ | --- | - | ------ | --- | - | ------ | --- | - | ------ | ---
|                                                |   | 2013   |   |   | 2013   |  |   | 2013   |  |   | 2013   |  |   | 2012   | (2) |   | 2012   | (2) |   | 2012   | (2) |   | 2012   | (2)
|Gold sold(oz)                                   |   | 33,247 |   |   | 28,637 |  |   | 28,024 |  |   | 28,642 |  |   | 24,241 |     |   | 25,153 |     |   | 23,499 |     |   | 21,235 |    
|Silver sold(oz)                                 |   | 21,847 |   |   | 16,228 |  |   | 16,124 |  |   | 14,313 |  |   | 16,203 |     |   | 13,857 |     |   | 14,452 |     |   | 11,740 |    
|Average realized
      gold price(per oz)       | $ | 1,249  |   | $ | 1,329  |  | $ | 1,253  |  | $ | 1,602  |  | $ | 1,675  |     | $ | 1,660  |     | $ | 1,624  |     | $ | 1,681  |    
|                                                |   |        |   |   |        |  |   |        |  |   |        |  |   |        |     |   |        |     |   |        |     |   |        |    
|Average London PM
      fix gold price (per oz) | $ | 1,276  |   | $ | 1,326  |  | $ | 1,415  |  | $ | 1,632  |  | $ | 1,722  |     | $ | 1,652  |     | $ | 1,609  |     | $ | 1,691  |    
|By-product cash
      cost(1) (per oz)          | $ | 723    |   | $ | 738    |  | $ | 705    |  | $ | 703    |  | $ | 723    |     | $ | 668    |     | $ | 709    |     | $ | 715    |    
|Metal revenues                                  | $ | 41,516 |   | $ | 38,065 |  | $ | 35,123 |  | $ | 45,889 |  | $ | 40,596 |     | $ | 41,748 |     | $ | 38,160 |     | $ | 35,688 |    
|                                                |   |        |   |   |        |  |   |        |  |   |        |  |   |        |     |   |        |     |   |        |     |   |        |    
|Earnings from
      operations                  | $ | 9,245  |   | $ | 9,261  |  | $ | 3,382  |  | $ | 19,253 |  | $ | 16,384 |     | $ | 19,166 |     | $ | 14,345 |     | $ | 13,043 |    
|(Loss) Earnings (Loss)                          | $ | (4,684 | ) | $ | 4,764  |  | $ | 972    |  | $ | 14,291 |  | $ | 12,270 |     | $ | 13,690 |     | $ | 6,715  |     | $ | 5,057  |    
|Earnings per
      share                        |   |        |   |   |        |  |   |        |  |   |        |  |   |        |     |   |        |     |   |        |     |   |        |    
|-Basic                                          | $ | (0.03  | ) | $ | 0.03   |  | $ | 0.01   |  | $ | 0.10   |  | $ | 0.08   |     | $ | 0.09   |     | $ | 0.05   |     | $ | 0.04   |    
|-Diluted                                        | $ | (0.03  | ) | $ | 0.03   |  | $ | 0.01   |  | $ | 0.10   |  | $ | 0.08   |     | $ | 0.09   |     | $ | 0.05   |     | $ | 0.04   |    
|Cash flows from
      operations                | $ | 15,243 |   | $ | 10,668 |  | $ | 4,678  |  | $ | 21,824 |  | $ | 13,373 |     | $ | 15,425 |     | $ | 9,610  |     | $ | 13,131 |    
|                                                |   |        |   |   |        |  |   |        |  |   |        |  |   |        |     |   |        |     |   |        |     |   |        |    
|Cash dividends declared                         | $ | Nil    |   | $ | Nil    |  | $ | Nil    |  | $ | Nil    |  | $ | Nil    |     | $ | Nil    |     | $ | Nil    |     | $ | Nil    |    

|(1) | Refer to the Non-GAAP and Additional GAAP Measures section of the
      MD&A.                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Due to the adoption of IFRIC 20 - Stripping Costs in
      the Production Phase of a Surface Mine, which was effective January 1,
      2013 and applied retroactively to January 1, 2012, previously reported
      financial results for Q1 2012, Q2 2012, Q3 2012, and Q4 2012 have been
      recast in the table above. Please refer to note 4a)ii to the consolidated
      financial statements.

Trend analysis

The Company has realized an increasing volume of gold ounces
sold over the past several quarters, which has had a positive impact on metal
revenues. YTD 2013 has seen a drop in gold prices, and therefore realized gold
prices have decreased in parallel. This has resulted in lower than expected
revenue.

Q4 2013 Results

The Company had a loss of $4.7 million, compared to earnings of
$12.3 million for Q4 2012 as a result of the following factors:

6

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Metal revenues

The Company sold 33,247 gold ounces at an average realized gold price of $1,249 per ounce, compared to sales of 24,241 gold ounces at an average realized gold price of $1,675 per ounce during Q4 2012. This represents an increase of 37% in
gold ounces sold and a decrease of 25% in realized gold price. As a result, total metal revenues from mining operations were $41.5 million, compared to $40.6 million during Q4 2012. The average London PM Fix price was $1,276 per gold
ounce, compared to $1,722 per gold ounce during Q4 2012. This represents a 26% decrease over Q4 2012.

Cost of sales

Production costs, which comprise the full cost of operations less depreciation and depletion, form a component of cost of sales and were $24.5 million, compared to $18.0 million during Q4 2012. This increase is substantially attributed to
the increased number of gold ounces sold. Also, due to the reduced gold price during Q4 2013, the Company included in production costs $0.4 million of mining costs associated with stockpiling ore. These mining costs represent the portion of
total mining costs related to the ore stockpiled which are greater than the NRV of such stockpiled ore.

Depletion and depreciation costs form a component of cost of sales and were $4.5 million, compared to $2.4 million during Q4 2012. This resulted from the increased number of gold ounces sold, in addition to the impact of a higher cost base
of mineral properties, plant and equipment on hand, due to capital additions in the periods since December 31, 2012.

Impairment of non-current unprocessed ore stockpile

Due to the updated mine plan released during Q4 2013, an impairment assessment was required in order to determine whether the NRV
of the unprocessed ore stockpile was less than the total expected costs to
process it. As a result of this impairment assessment, an impairment charge of
$0.8 million was recognized against the net book value of the non-current
unprocessed ore stockpile, compared to $nil during Q4 2012.

Corporate and administrative expenses

Corporate and administrative expenses decreased to $2.5 million, compared to $3.8 million during Q4 2012. Share-based payments form a component of the corporate and administrative expenses and decreased to $0.1 million from $1.0
million during Q4 2012. This decrease is a direct result of nearly all previously granted options having been vested by the end of Q4 2013. Salaries increased to $1.0 million, compared to $0.9 million during Q4 2012 partially due to
severance payments made. Consulting and professional fees decreased to $0.7 million, compared to $0.9 million during Q4 2012 as a result of fewer consulting companies working with the Company
combined with reduced professional fees.

Finance expense

Finance expense was $0.4 million, compared to $0.5 million during Q4 2012. This decrease is a result of lower accretion expense during Q4 2013. In December 2013, the loan facility was renegotiated to carry a cash interest rate of 9%.

Income taxes

Income tax expense was $14.2 million, compared to $4.2 million during Q4 2012. The current tax expense increased to $2.5 million from a current tax recovery of $0.1 million during Q4 2012 due to the increased number of gold ounces
sold offset partially by the decline in gold price since Q4 2012. Deferred tax expense was $11.7 million, compared to $4.3 million during Q4 2012. As a result of the Tax Reform being substantially enacted during
December 2013, temporary
differences arose between the book basis of certain assets and liabilities and their tax basis. The Company recognized a one-time non-cash charge of $8.6 million related to the future income tax impacts of the SMD. This deferred tax liability
will be drawn down to $nil as a reduction to deferred tax expense over the life of mine as the mine and its related assets are depleted and depreciated. The effective tax rate for Q4 2013 was impacted by the non-deductibility of the share-based
payments and an increase in unrecognized tax assets of both the Canadian parent and non-operating Mexican subsidiary.

7

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Q4 2013 vs. Q3 2013

The Company had a loss of $4.7 million, compared to earnings of $4.8 million for Q3 2013 as a result of the following factors:

Metal revenues

The Company sold 33,247 gold ounces at an average realized gold price of $1,249 per ounce, compared to sales of 28,637 gold ounces at an average realized gold price of $1,329 per ounce during Q3 2013. This represents an increase of 16% in
gold ounces sold and a decrease of 6% in realized gold price. As a result, total metal revenues from mining operations were $41.5 million, compared to $38.1 million during Q3 2013. The average London PM Fix price was $1,276 per gold
ounce, compared to $1,326 per gold ounce during Q3 2013. This represents a 4% decrease over the prior period.

Cost of sales

Production costs, which comprise the full cost of operations less depreciation and depletion, form a component of cost of sales and increased to $24.5 million, compared to $21.5 million during Q3 2013. Due to the reduced gold price during Q4
2013, the Company included in production costs $0.4 million of mining costs associated with stockpiling ore, compared to $0.5 million during Q3 2013. These mining costs represent the portion of total mining costs related to the ore
stockpiled which are greater than the NRV of such stockpiled ore.

Depletion and depreciation costs form a component of cost of sales and were $4.5 million, compared to $4.2 million during Q3 2013. This resulted from the increased number of gold ounces sold.

Impairment of non-current unprocessed ore stockpile

Due to the updated mine plan released during Q4 2013, an impairment assessment was required in order to determine whether the NRV
of the unprocessed ore stockpile was less than the total expected costs to
process it. As a result of this impairment assessment, an impairment charge of
$0.8 million was recognized against the net book value of the non-current
unprocessed ore stockpile, compared to $nil during Q3 2013.

Corporate and administrative expenses

Corporate and administrative expenses decreased to $2.5 million, compared to $3.1 million during Q3 2013. Share-based payments form a component of the corporate and administrative expenses and were consistent at $0.1 million, compared to
$0.1 million at Q3 2013. Salaries decreased to $1.0 million, compared to $1.3 million during Q3 2013 partially due to severance payments made during the Q3 2013. Consulting and professional fees were consistent at $0.7 million,
compared to $0.7 million during Q3 2013.

Finance expense

Finance expense was consistent at $0.4 million, compared to $0.4 million during Q3 2013. In December 2013, the loan facility was renegotiated to carry a cash interest rate of 9%.

Income taxes

Income tax expense was $14.2 million, compared to $3.9 million during Q3 2013. The current tax expense increased to $2.5 million from a current tax expense of $0.1 million during Q3 2013 substantially due to the increased number of
gold ounces sold. Deferred tax expense was $11.7 million, compared to $3.8 million during Q3 2013. As a result of the Tax Reform being substantially enacted during
December 2013, temporary differences arose between the book basis of certain assets
and liabilities and their tax basis. The Company recognized a one-time non-cash charge of $8.6 million related to the future income tax impacts of the SMD. This deferred tax liability will be drawn down to $nil as a reduction to deferred tax
expense over the life of mine as the mine and its related assets are depleted and depreciated. The effective tax rate for Q4 2013 was impacted by the non-deductibility of the share-based payments and an increase in
unrecognized tax assets of both the Canadian parent and non-operating Mexican
subsidiary.

8

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

|SAN FRANCISCO
      GOLD MINE - OPERATIONS REVIEW
|-------------------------------------------------

The Mine, which was commissioned in April 2010, is located in
the Arizona-Sonora desert in the northern portion of the Mexican state of
Sonora. The Mine is an open pit operation, with crushing and heap leach
processing facilities. The following is a summary of the Mines production
statistics:

|                                         |  | Three months ended
      December 31, |  |  | Years ended December
      31, | 
|---------------------------------------- |  | ------------------------------------- |  |  | ------------------------------ | 
|                                         |  | 2013                                  |  |  | 2012                           | 
|Ore processed(t)                         |  | 2,014,968                             |  |  | 1,493,623                      | 
|Average ore processed grade(g/t Au)      |  | 0.87                                  |  |  | 0.82                           | 
|Ore mined(dry tonnes)                    |  | 2,284,241                             |  |  | 2,020,423                      | 
|Average ore mined grade(g/t Au)          |  | 0.74                                  |  |  | 0.71                           | 
|Ore stockpiled(t)                        |  | 349,338                               |  |  | 526,800                        | 
|Average ore stockpiled grade(g/t Au)     |  | 0.25                                  |  |  | 0.27                           | 
|Waste mined(t)                           |  | 5,307,526                             |  |  | 5,295,383                      | 
|Total mined(t)                           |  | 7,591,767                             |  |  | 7,315,806                      | 
|Strip ratio                              |  | 2.32                                  |  |  | 2.62                           | 
|Total days in period                     |  | 92                                    |  |  | 92                             | 
|Average ore processed per
      day(t/d) |  | 21,902                                |  |  | 16,235                         | 
|Gold produced(oz)                        |  | 34,164                                |  |  | 24,556                         | 
|Silver produced(oz)                      |  | 21,847                                |  |  | 16,203                         | 

The Company produced 34,166 gold ounces and 21,847 silver
ounces during Q4 2013, compared to 24,556 gold ounces and 16,203 silver ounces
during the same prior year period.

The Company produced 119,655 gold ounces and 68,512 silver
ounces during YTD 2013, compared to 94,444 gold ounces and 56,252 silver ounces
during YTD 2012.

The Company mined a total of 7.6 million tonnes from the Mine
during Q4 2013, compared to 7.3 million tonnes during the same prior year
period. Dry tonnes of ore mined were 2.3 million tonnes of ore during the Q4
2013, compared to 2.0 million tonnes of ore during the same prior year period.
The strip ratio decreased to 2.32 during Q4 2013 from 2.62 during the same prior
year period as a result of a planned decrease in waste being mined. The Company
stockpiled 0.3 million tonnes during the Q4 2013, compared to 0.5 million tonnes
during the same prior year period.

The Company mined a total of 32.1 million tonnes from the Mine
during YTD 2013, compared to 26.2 million tonnes during YTD 2012. Dry tonnes of
ore mined were 8.7 million tonnes of ore during YTD 2013, compared to 8.4
million tonnes of ore during YTD 2012. The strip ratio increased to 2.67 during
YTD 2013 from 2.10 during the same prior year period as a result of a planned
increase in waste being mined during YTD 2013. The Company stockpiled 1.7
million tonnes during YTD 2013, compared to 3.0 million tonnes during YTD 2012.

The Company increased total tonnes mined quarter over quarter
through calendar 2010 and 2011, which led to a planned expansion of the crushing
facilities from 14,000 t/d to 16,000 t/d. The Company commissioned the expansion
in July 2011 with successful testing through July and August 2011. In Q4 2012,
the Company completed the installation of an additional crushing circuit which
increased total crushing capacity to 24,000 t/d.

The average grade of ore processed during Q4 2013 was 0.87 g/t
Au, compared to the the same prior year period of 0.82 g/t Au due to a planned
change in processed ore grade. The average grade of ore mined from the Mine
during Q4 2013 was 0.74 g/t Au, compared to the same prior year period of 0.71
g/t Au.

The average grade of ore processed during YTD 2013 was 0.82 g/t
Au, compared to YTD 2012 of 0.85 g/t Au due to a planned change in processed ore
grade. The average grade of ore mined from the Mine during YTD 2013 was 0.71 g/t
Au, compared to YTD 2012 of 0.65 g/t Au.

9

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

|GOLD PROPERTY -
      RESOURCE REVIEW
|-------------------------------------

On September 20, 2011, the Company announced an updated NI
43-101 resource and reserve update audited by MICON International Ltd (MICON),
with the actual report being released November 23, 2011. On March 14, 2012, the
Company released a further update to the resource estimate in which the measured
and indicated and inferred resources were increased to 1,575,000 ounces and
1,351,000 ounces, respectively, from 1,441,000 ounces and 1,005,000 ounces,
respectively. The March 14, 2012 resource estimate update was audited by MICON.
On November 5, 2013, the Company announced an updated NI 43-101 resource and
reserve and mine plan update audited by MICON, with the actual report being
released December 24, 2013. Measured and indicated and inferred resources were
increased to 1,868,000 ounces and 1,782,000 ounces, respectively, from 1,575,000
ounces and 1,351,000 ounces, respectively and the mine life was extended to
2022.

Mineral reserves for the Gold Property, which are part of the
mineral resources, are estimated to be:

|In pit reserves           | Tonnes (000) | Grade (g/t Au) | Gold ounces
|------------------------- | ------------- | -------------- | -----------
|Proven                    | 57,316        | 0.55           | 1,013,000  
|Probable                  | 33,883        | 0.53           | 576,000    
|Total proven and probable | 91,199        | 0.54           | 1,589,000  

Mineral reserves within the Gold Property pit design
(December 24, 2013) at $1,250/oz gold price and after mining recovery and
dilution.

The total resource of the Gold Property is estimated to be:

|Resource classification          | Tonnes (000) | Grade (g/t Au) | Gold ounces
|-------------------------------- | ------------- | -------------- | -----------
|Measured mineral resource        | 63,778        | 0.58           | 1,189,000  
|Indicated mineral
      resource | 37,940        | 0.56           | 679,000    
|Total measured and indicated     | 101,718       | 0.57           | 1,868,000  
|Inferred
      mineral resource  | 122,177       | 0.45           | 1,782,000  

Mineral resource estimate for the Gold Property (inclusive
of mineral reserves).Cut-off grade of 0.17 g/t Au and 0.15 g/t for
the San Francisco and La Chicharra pits, respectively at $1,250/oz gold price.

Mineral resources that are not mineral reserves do not have
demonstrated economic viability. Inferred mineral resources are considered too
speculative geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves.

As illustrated above, inferred resources are estimated to
contain approximately 1,782,000 ounces of gold.

|GOLD PROPERTY -
      DEVELOPMENT REVIEW
|----------------------------------------

San Francisco open pit gold mine

During 2013, the Company focused on the continued development
of the Mine and completed an additional drilling program with a total of 135,436
meters drilled as follows:

- A total of 113,280 meters of drilling were completed in and around the
  Mine; and
- A total of 15,095 meters were drilled in exploration areas outside of the San Francisco and La Chicharra pits with an additional 7,061 meters of core drilling.

10

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

Mineral reserves for the Mine, which are part of the mineral
resources, are estimated to be:

|In pit reserves           | Tonnes (000) | Grade (g/t Au) | Gold ounces
|------------------------- | ------------- | -------------- | -----------
|Proven                    | 44,952        | 0.56           | 808,000    
|Probable                  | 26,420        | 0.55           | 465,000    
|Total proven and probable | 71,372        | 0.56           | 1,273,000  

The total resource of the Mine is estimated to be:

|Resource classification         | Tonnes (000) | Grade (g/t Au) | Gold ounces
|------------------------------- | ------------- | -------------- | -----------
|Measured mineral resource       | 50,351        | 0.60           | 968,000    
|Indicated mineral resource      | 26,093        | 0.59           | 496,000    
|Total measured and indicated    | 76,444        | 0.60           | 1,464,000  
|Inferred
      mineral resource | 95,830        | 0.46           | 1,431,000  

La Chicharra open pit gold mine

The Company has also commenced an exploration program on La
Chicharra. La Chicharra is located 2 km west of the Mine. Discovered by Geomaque
Explorations Ltd. (Geomaque) in the late 1990s, it is estimated that
approximately 37,000 ounces of gold were extracted and processed during
Geomaques last year of operations.

The discovery of this deposit was the consequence of
exploration programs comprised of magnetic ground surveys and soil geochemistry,
using both conventional soil sampling and advanced surface exploration (Mobile
Metal Ion - MMI) techniques. In both cases, samples returned very high values
for the main mineralized zone in an area of low magnetics. Trenches were
excavated to conduct chip sampling, which confirmed the presence of gold
mineralization in the bedrock, and drilling delineated a deposit with a resource
of 60,000 to 70,000 ounces of gold. Strong gold geochemical anomalies suggest
that there is the possibility of further gold mineralization at depth.

Drilling was conducted in the west-northwest and north
area of the existing La Chicharra pit. The drilling in the west-northwest area
was focused on identifying continuity along strike of the known mineral body,
while drilling in the north was focused on identifying additional mineralization
at the wall of the existing La Chicharra mineral deposit.

Ongoing drilling continued in 2013 to the northwest of the La
Chicharra prospect with the objective of testing mineralization along a strike
length of over 600 meters. The drilling program concluded in Q2 2013.

Mineral reserves for La Chicharra, which are part of the
mineral resources, are estimated to be:

|In pit reserves                                        | Tonnes (000) | Grade (g/t Au) | Gold ounces
|------------------------------------------------------ | ------------- | -------------- | -----------
|Proven                                                 | 12,364        | 0.52           | 205,000    
|Probable                                               | 7,463         | 0.46           | 111,000    
|Total proven and probable                              | 19,827        | 0.50           | 316,000    
|                                                       |               |                |            
|The total resource of La Chicharra is estimated to be: |               |               
|                                                       |               |                |            
|Resource classification                                | Tonnes (000) | Grade (g/t Au) | Gold ounces
|Measured mineral resource                              | 13,427        | 0.51           | 221,000    
|Indicated mineral resource                             | 11,847        | 0.48           | 183,000    
|Total measured and indicated                           | 25,274        | 0.50           | 404,000    
|Inferred mineral resource                              | 26,347        | 0.41           | 351,000    

11

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

|OTHER PROPERTIES - EXPLORATION REVIEW
|-------------------------------------

La Pima target

The La Pima target consists of a series of northeast trending limestone ridges at the central-west part of the claim of the same name, located 25 km northwest of the Mine and 13 km west of the town of Santa Ana. During Q4 2013, an initial program of
mapping and rock sampling was performed along more than 3 kms of outcrops of the limestone trend indentifying at least three mineral targets where there exists evidence of silver and polymetallic mineralization and erratic gold grades. Mapping and
sampling was performed to identify the main geological structures of the mineralization. Assay results show high silver grades above 1.0 kilograms of silver per tonne (“kg/t Ag”) and anomalous gold grades of 1.0 g/t Au.

The company is assessing a core drill program on at least two of the three targets identified in the exploration work of 2013.

San Onesimo

The property is situated 16 km to the northeast of the Camino Rojo gold deposit and 45 km southeast of the Peñasquito gold deposit.

Following up on the exploration work completed in 2011, IP and magnetic surveys were conducted over 18 lines to cover a total longitude of 76.9 km on three targets selected from the MMI soil sampling survey completed in 2011. Six core drill holes
were completed in 2012 for a total of 1,523 meters. The values of gold and some other trace elements detected by the drilling were low, however, they did confirm the favourable lithology of the area and suggest directing exploration toward the
southwest of the property, as it contains a very strong geochemical anomaly associated with scarce outcrops with polymetallic mineralization.

No exploration was performed on this property during 2013 and the Company has no plans for further exploration work while resources are allocated to the development of the Gold Property.

TIM Claims

There are 5 mining concessions 100% owned by Timmins Goldcorp Mexico, all within the region of Mazapil-Concepcion del Oro. This region is located in the north of the state of Zacatecas, and has emerged over the last few years as one of the most
active mining exploration and development regions in Mexico and all Latin America.

During 2012, the exploration activity in the southeast portion focused on an area 2 by 2 km, which was initially defined for high gold and silver values in two rock chip samples. Also, combined soil and rock chip sampling was completed on the El
Marmol and El Tecolote areas. Initial samples were taken on isolated outcrops of assayed high silver values, and geology mapping and interpretation of aerial photos was performed as well.

No exploration was performed on this property during 2013 and the Company has no plans for further exploration work while resources are allocated to the development of the Gold Property.

Patricia Property

The property is located in the north-central portion of the state of Sonora, 50 km to the southwest of the Mine. The Company has undertaken trenching and systematic sampling which has returned anomalous gold values of between 1.0 to 2.0 g/t Au with
potential silver and polymetallics.

No exploration was performed on this property during 2013 and the Company has no plans for further exploration work while resources are allocated to the development of the Gold Property.

Norma Property

The property is located 30 km northwest of the Mine. During 2011, the Company completed 2,090 meters of reverse circulation drilling, distributed in 16 drill holes along 2,000 meters of gold anomalous outcrops.

12

---

|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Drilling returned intercepts ranging from 0.32 g/t to 27 g/t Au hosted in veins, veinlets and breccia, mainly in close contact to the sandstones and siltstones with dikes of monzonite.

No exploration was performed on this property during 2013 and the Company has no plans for further exploration work while resources are allocated to the development of the Gold Property.

El Picacho Property

The property is located in the north-central portion of the state of Sonora, 20 km southwest of the Mine. Exploration by the Company included geological mapping, sampling and compilation of the exploration work performed by previous exploration
companies on the property.

The Company has drilled 8 holes on the property for a cumulative total of 1,478 meters. No exploration was performed on this property during 2013 and the Company has no plans for further exploration work while resources are allocated to the
development of the Gold Property.

El Durazno target

El Durazno target is located 10 kms to the north of the Mine. During the second half of 2012 and YTD 2013 the Company completed exploration work including prospecting, geological mapping, rock and soil sampling and reverse circulation drilling
totalling 3,342 meters in 15 drill holes distributed over two mineral targets within the project.

Drilling returned important mineral intersections in nine of these drill holes, the most significant of which are in the following:

- DRC13-005 an interval of 21.34 meters with a grade of 1.53 g/t Au including three mineral intervals of 10.67 meters width at 2.91 g/t Au, 4.57 meters of 6.48 g/t Au and 1.52 meters of 14.42 g/t Au. Along of the same hole at an interval of 10.67
meters of 1.47 g/t Au including 1.52 meters of 8.78 g/t Au;
- DRC13-011 at an interval of 28.96 meters with a grade of 0.42 g/t Au including 9.14 meters of 1.11 g/t Au;
- DRC13-004 an interval of 7.62 meters of 0.69 g/t Au including 1.79 g/t Au over 1.52 meters; and
- DRC-009 intersected 6.10 meters of 0.39 g/t gold.

Although this is an initial drill campaign on a new area, the results show that further exploration should be performed on the target however the Company has no current plans for further exploration work while resources are allocated to the
development of the Gold Property.

La Mexicana target

The La Mexicana target is located 6.5 km north of the Mine. Mapping and sampling was performed along the north portion of the metamorphic precambrian belt of the San Francisco gold deposit, which includes systematic sampling of the existing
underground works on the La Mexicana target. The assays included gold values as high as 28.91 g/t Au and generally showed consistency along the old underground workings.

In October 2011 and November 2011, 16 holes were drilled for a total of 2,669 meters to assist in further assessing the La Mexicana exploration potential.

No exploration was performed on this property during 2013 and the Company has no plans for further exploration work while resources are allocated to the development of the Gold Property.

El Capomo target

The El Capomo target is located in the state of Nayarit and consists of six concessions covering more than 47,500 hectares. Prospecting work done on the property has identified favourable geology for mineral discoveries in at least five locations;
the most significant is a series of quartz veins and quartz outcrops along 1,200 meters with widths varying from 0.70 meters to 3.0 meters with gold and silver grades varying from 0.28 to 3.45 g/t Au and 15 to 240 g/t Ag.

13

---

|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

During 2013, the target area of El Capomo was reduced to include only the most significant concessions for exploration. Instead of the original 47,500 hectares, the El Capomo target now consists of three mining concessions totalling 9,786
hectares.

|LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES
|-------------------------------------------

Liquidity

Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with its financial liabilities and other contractual obligations. The Company’s strategy for managing liquidity is based on achieving
positive cash flows from operations to internally fund operating and capital requirements.

Material increases or decreases in the Company’s liquidity and capital resources will be substantially determined by the success or failure of the Company’s operations, exploration, development and construction programs, its ability to
obtain equity or other sources of financing, and the price of gold. Factors that can impact the Company’s liquidity are monitored regularly and include the market price of gold, production levels, cash cost per gold ounce on a by-product
basis, capital costs, exploration expenditures, and foreign currency fluctuations.

The Company monitors and manages liquidity risk by preparing regular periodic cash flow forecasts, and seeking flexibility in financing arrangements. In today’s metal price environment, the Company anticipates that funding from operating cash
flows should be sufficient to fund the Company’s commitments, working capital requirements and capital expenditures at its existing mining interests. This leaves the Company’s current cash balance available to pursue future growth plans.
The Company had cash on hand at December 31, 2013 of $22.8 million and VAT receivable of $12.4 million, of which $3.1 million was recovered subsequent to December 31, 2013. In addition, the Company has $27.1 million in trade payable
and accrued liabilities, and $16.4 million (C$18.0 million) in debt related to the Sprott loan facility and $3.2 million related to equipment financing.

Cash flow provided by operating activities will vary depending on the prices of gold, fluctuations in the Mexican peso value, and total production during the year. The Company expects to generate positive cash flow from operating activities over the
next year achieved through strong production results at the Mine.

Various tax and legal matters are outstanding from time to time. In the event that management’s estimate of the future resolution of these matters changes, the Company will recognize the effects of these changes in the consolidated financial
statements on the date such changes occur. The Company will also have commitments with regards to payments going to El Picacho and San Onesimo exploration properties at various dates until January 2015.

During December 2013, the Tax Reform, published in Mexico’s official gazette,
created a 7.5% SMD based on a form of earnings before interest, tax,
depreciation and amortization and a 0.5% EMD based on gross revenues.
Both the SMD and EMD will be deductible for income tax purposes. As a result of these changes being enacted in December 2013, the Company recognized a one-time non-cash deferred tax expense of $8.6 million due to the future income tax impact of
the SMD. Also, there will no longer be a gradual rate reduction as enacted in 2012, the income tax rate for 2014 and thereafter will remain at 30%. These changes are effective January 1, 2014.

14

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|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

A summary of non-discounted liabilities and future operating
commitments are as follows:

|                                                     |   |         |  |   |         |  |   |         |  |   | Greater | 
|---------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- | 
|                                                     |   |         |  |   | Within  |  |   | 2 - 5   |  |   | than 5  | 
|                                                     |   | Total   |  |   | 1 year  |  |   | years   |  |   | years   | 
|Trade payables and accrued
      liabilities         | $ | 27,144  |  | $ | 27,144  |  | $ | -       |  | $ | -       | 
|Vendor loan                                          |   | 1,725   |  |   | 1,725   |  |   | -       |  |   | -       | 
|Loan facility (C$18,000)                             |   | 16,924  |  |   | 16,924  |  |   | -       |  |   | -       | 
|Equipment financing                                  |   | 3,214   |  |   | 1,134   |  |   | 2,080   |  |   | -       | 
|Interest payments on loan
      facility and         |   |         |  |   |         |  |   |         |  |   |         | 
|equipment financing                                  |   | 1,861   |  |   | 1,717   |  |   | 144     |  |   | -       | 
|Future operating commitments
      (1)               |   | 233,831 |  |   | 66,999  |  |   | 166,832 |  |   | -       | 
|Provision for site reclamation and closure
      (2) |   | 4,540   |  |   | -       |  |   | -       |  |   | 4,540   | 
|Other provisions (3)                                 |   | 1,127   |  |   | -       |  |   | 1,127   |  |   | -       | 
|                                                     | $ | 290,366 |  | $ | 115,643 |  | $ | 170,183 |  | $ | 4,540   | 

|(1) | The future operating commitments of the Company are
      mainly due to the mining contract with Peal de Mexico, S.A. de C.V.
      (Peal). The original Peal contract was for 42 months, however an
      addendum was signed effective November 1, 2012 for five years (December
      31, 2013 - 46 months remaining) and covers substantially all mining
      services at a cost of $1.59 per tonne of material mined ($1.64 per the
      original contract). In addition, the new Peal contract contains a
      provision for a reduced cost of $1.57 per tonne on the tonnage moved in a
      month exceeding 2,500,000 tonnes (but less than 3,000,000 tonnes), and a
      reduced cost of $1.55 per tonne on the tonnage moved in a month exceeding
      3,000,000 tonnes. The Peal commitment is based on the forecasted minimum
      tonnage to be mined until the end of the mining contract, and would be
      significantly less in the event that mining activities at the Mine ceased.
      Operating commitments also includes a guarantee provided by the Company
      for the office premises at its corporate office.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(2) | Provision for site reclamation and closure represents the
      non-discounted amount of the estimated cash flows required to settle the
      retirement obligations of the Mine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(3) | Other provisions represent the non-discounted amount of
      the demobilization costs related to the Peal contract, whereby the Company
      is responsible for demobilization costs of $0.9 million (plus value added
      tax) payable one month prior to the end of the mining contract. This
      obligation has been recorded at an annualized discount rate of 1.4%,
      reflecting the implied interest rate, and calculated according to the
      formula stipulated in the contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Cash flow

|                                                     |   | Three months ended
      December 31, |   |   | Years ended December
      31, |  
|---------------------------------------------------- | - | ------------------------------------- | - | - | ------------------------------ | -
|                                                     |   | 2013                                  |   |   | 2012                           |  
|Cash flow provided by
      operating activities     | $ | 15,243                                |   | $ | 13,373                         |  
|Cash flow used in investing activities               | $ | (6,498                                | ) | $ | (18,171                        | )
|Cash flow (used in) provided by financing activities | $ | (346                                  | ) | $ | 872                            |  

Cash flow from operating activities for Q4 2013 was $15.2
million, compared to $13.4 million for Q4 2012. The main drivers of this change
over prior year are increased ounces sold for the current period offset by a
lower average realized gold price resulting in earnings before income taxes of
$9.5 million, compared to $16.5 million during Q4 2012. Movements in trade
receivables increased cash flows by $5.3 million during Q4 2013 as a result of
the collection of VAT receivable, compared to a decrease of $7.7 million during
Q4 2012, while the movements in inventories decreased cash flows by $2.8 million
in Q4 2013, compared to a decrease of $1.4 million in Q4 2012. Movements in
trade payables and other liabilities reduced cash flows by $1.9 million during
Q4 2013, compared to an increase of $3.1 million during Q4 2012. Tax payments
were $nil during Q4 2013 (Q4 2012 - $nil) as a result of the Company
continuing to use VAT receivable to pay income tax balance instalments.

15

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|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

Similarly, cash flow from operating activities for YTD 2013 was
$52.4 million, compared to $51.1 million for YTD 2012. The main drivers of this
change over prior year are increased ounces sold for the period partially offset
by lower realized gold prices, resulting in earnings before income taxes of
$40.2 million, compared to $59.5 million during YTD 2012. Movements in trade
receivables reduced cash flows by $4.2 million during YTD 2013, compared to a
decrease of $18.9 million during YTD 2012, while the movements in inventories
decreased cash flows by $10.2 million in YTD 2013, compared to a decrease of
$9.7 million in YTD 2012. Movements in trade payables and other liabilities
increased cash flows by $1.2 million during YTD 2013, compared to an increase of
$2.2 million during YTD 2012. Tax payments were $nil during YTD 2013 (YTD 2012 -
$nil) as a result of the Company continuing to use VAT receivable to pay income
tax balance instalments.

Cash flow used in investing activities for Q4 2013 was $6.5
million, compared to $18.2 million for Q4 2012 due to the majority of capital
projects being completed prior to Q4 2013. Cash flow used in investing
activities for YTD 2013 was $52.6 million compared to $38.6 million for YTD
2012. These movements are a direct result of increased expenditures on
exploration, plant, crusher and leach pad expansions.

Cash flow used in financing activities for Q4 2013 and YTD 2013
was $0.3 million and $1.2 million, respectively, compared to cash flow provided
by financing activities of $0.9 million and $1.8 million during Q4 2012 and YTD
2012, respectively. Cash flow from shares issued for cash was $nil during Q4
2013 and $0.2 million YTD 2013, compared to $1.2 million and $3.6 million during
Q4 2012 and YTD 2012, respectively.

At the Gold Property, a significant amount of the operating
expenditures are denominated in Mexican pesos, while a significant amount of
office costs in Vancouver, Canada are denominated in Canadian dollars.
Fluctuations in these currencies can have an impact on the Companys costs.
During Q4 2013, the Mexican peso averaged MXP 13.02 to $1.00, and the Canadian
dollar averaged C$1.05 to $1.00, compared to MXP 12.94 to $1.00, and C$0.99 to
$1.00 during Q4 2012. During YTD 2013, the Mexican peso averaged MXP 12.76 to
$1.00, and the Canadian dollar averaged C$1.03 to $1.00, compared to MXP 13.16
to $1.00, and C$1.00 to $1.00 during YTD 2012.

Capital resources

The capital of the Company consists of the consolidated equity
and the loan facility, net of cash.

|                    |   | December 31, |   |   | December 31, |   |   | January 1, |  
|------------------- | - | ------------ | - | - | ------------ | - | - | ---------- | -
|                    |   | 2013         |   |   | 2012         |   |   | 2012       |  
|Equity              | $ | 164,352      |   | $ | 148,060      |   | $ | 100,181    |  
|Loan facility       |   | 16,438       |   |   | 17,641       |   |   | 17,246     |  
|Equipment financing |   | 3,214        |   |   | -            |   |   | -          |  
|                    |   | 184,004      |   |   | 165,701      |   |   | 117,327    |  
|Less: Cash          |   | (22,776      | ) |   | (24,188      | ) |   | (9,865     | )
|                    | $ | 161,228      |   | $ | 141,513      |   | $ | 107,462    |  

At December 31, 2013, there were no externally imposed capital
requirements to which the Company is subject and with which the Company has not
complied. The capital resources of the Company have increased to $161.2 million
from $141.5 million at December 31, 2012 due to the continued profitability of
the Company.

On July 5, 2012, the Company renegotiated the terms of its
C$18.0 million loan facility (the loan facility) with Sprott Asset Management
LP (the Lender) (original loan facility signed June 1, 2011). The loan
facility carried an interest rate of 8% per annum and was repayable in full on
or before December 31, 2013. As part of the terms of the loan facility, the
Company paid a fee to the Lender equal to 2% of the loan facility balance,
payable in common shares of the Company priced at a 10% discount to the 10 day
weighted average closing price of the shares; 217,918 shares were issued and
valued at C$0.4 million ($0.4 million). In the event the loan had not been
repaid by July 28, 2013, an anniversary fee of 1% of the loan amount outstanding
on that date was to be paid to the lender in shares priced at the same discount
on that date. These fees, in addition to other directly attributable transaction
costs, totalling C$0.6 million ($0.6 million), were included in the fair value
of the loan facility, and were amortized over the term of the loan
using the effective interest method. During June 2013, the anniversary fee
payment was waived which resulted in a C$0.2 million ($0.2 million) adjustment to the carrying value of the
loan.

16

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

During December 2013, the Company negotiated to extend the loan
facility 12 months beyond the original expiry date of December 31, 2013 in
exchange for 300,000 common shares of the Company. The shares were issued on
January 24, 2014 and had a fair value of C$0.5 million ($0.4 million) at the
date of issue. The liability for the fair value of the common shares issued is
included in trade payables and accrued liabilities for the year ended December
31, 2013. There is a four month holding period on the common shares. The amended
loan facility will now be repayable in full on or before December 31, 2014 with
a stated interest rate of 9% per annum.

Under the terms of the loan facility, the Company has pledged
all of its assets (including the assets of its subsidiaries) in favour of the
Lender as security over the loan facility. In addition, the subsidiaries have
each provided guarantees to the Lender for the repayment of any amounts advanced
to the Company under the terms of the loan facility.

Related party transactions

The Companys related parties include key management personnel
and any transactions with such parties for goods and/or services are made on
regular commercial terms and are considered to be at arms length. During the
years ended December 31, 2013 and 2012, the Company entered into the following
transactions with related parties:

- The Company incurred $nil (year ended December 31, 2012 - $30 thousand) of
  consulting fees to directors and officers; and
- At December 31, 2013, $6 thousand was due from these directors and
  officers (December 31, 2012 - $5 thousand was due to these directors and
  officers).

Key management are those personnel having the authority and
responsibility for planning, directing, and controlling the Company. Salaries,
benefits and bonuses are included in corporate and administrative expenses.

Key management compensation includes:

|                      |   | Years ended December
      31, | 
|--------------------- | - | ------------------------------ | 
|                      |   | 2013                           | 
|Salaries and benefits | $ | 1,555                          | 
|Bonuses               |   | 549                            | 
|Share-based payments  |   | 408                            | 
|                      | $ | 2,512                          | 

Dividends

No dividends were declared or paid during YTD 2013.

Outstanding share data

The total number of outstanding common shares and share options
at March 6, 2014 are 163,379,045 and 11,375,000, respectively.

17

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

|NON-GAAP AND
      ADDITIONAL GAAP MEASURES
|-------------------------------------------

Non-GAAP Measures

Cash cost per gold ounce and cash cost per gold ounce on
a by-product basis

Cash cost per gold ounce and cash cost per gold ounce on a
by-product basis are non-GAAP performance measures that management uses to
assess the Companys performance and its expected performance in the future. The
Company has included the non-GAAP performance measures of cash cost per gold
ounce and cash cost per gold ounce on a by-product basis throughout this
document.

In the gold mining industry, these are common performance
measure but do not have any standardized meaning. As such, they are unlikely to
be comparable to similar measures presented by other issuers. In reporting the cash cost per gold ounce and cash cost per
gold ounce on a by-product basis, the Company follows the recommendations of the
Gold Institute Standard.

Management believes that, in addition to conventional measures
prepared in accordance with GAAP, certain investors use this information to
evaluate the Companys performance and ability to generate cash flow.
Accordingly, it is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with GAAP.

The cash cost per gold ounce is calculated by dividing the
operating production costs by the total number of gold ounces sold. The cash
cost per gold ounce on a by-product basis is calculated by deducting the
by-product silver credits per gold ounce from the cash cost per gold ounce.
By-product silver credits per gold ounce are calculated by dividing the
by-product silver credits by the total number of gold ounces sold.

The following table provides a reconciliation of the cash cost
per gold ounce and cash cost per gold ounce on a by-product basis to the
consolidated financial statements:

|                                                   |              | Three months ended |   | Years ended  |       
|-------------------------------------------------- | ------------ | ------------------ | - | ------------ | ------
|                                                   | December 31, |                    |   | December 31, |       
|                                                   |              | 2013               |   |              | 2012  
|Production costs
      (1)                         | $            | 24,453             |   | $            | 18,021
|Divided by gold sold (oz)                          |              | 33,247             |   |              | 24,241
|Cash cost per gold ounce                           | $            | 735                |   |              | 743   
|Less: By-product silver credits per gold ounce (2) |              | (12                | ) |              | (20   
|Cash cost per gold ounce on a by-product basis     | $            | 723                |   | $            | 723   

|(1) | Due to the sustained decrease in gold price, the Company
      includes in production costs the portion of the mining costs associated
      with the tonnes of ore stockpiled during the period which are greater than
      the NRV of such tonnes. During the three months ended December 31, 2013
      and year then ended, the non-recoverable portion of mining costs
      associated with the tonnes of ore stockpiled included in production costs
      was $0.4 million and $0.8 million, respectively (three months ended
      December 31, 2012 and year then ended - $nil and $nil,
    respectively).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | Management has determined that silver metal revenues when
      compared to the gold metal revenues, are immaterial and therefore are
      considered a by-product of the production of gold. For the three months
      ended December 31, 2013 and year then ended, total by-product silver
      credits were $0.4 million and $1.4 million, respectively (three months
      ended December 31, 2012 and year then ended - $0.5 million and $1.7
      million, respectively).                                                                                                                                   

For further details on the calculation of production costs,
refer to the notes to the consolidated financial statements. Cash cost per gold
ounce and cash cost per gold ounce on a by-product basis are not necessarily
indicative of earnings from operations or cash flow from operations as
determined under GAAP. Other companies may calculate these measures differently.

18

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

All-in sustaining cash cost per gold ounce

Following a non-GAAP initiative within the gold mining
industry, the Company has adopted an all-in sustaining cash cost per ounce on a
by-product basis performance measure which is calculated based on the guidance
note issued by the World Gold Council during Q2 2013. Management uses this
information as an additional measure to evaluate the Companys performance and
ability to generate cash flow.

All-in sustaining cash costs on a by-product basis include
total production cash costs, costs associated with mining the non-current
unprocessed stockpile, corporate and administrative expenses, and sustaining
capital expenditures. The Company believes this measure to be representative of
the total costs associated with producing gold; however, this performance
measure has no standardized meaning.

As such, there are likely to be differences in the method of
computation when compared to similar measures presented by other issuers.

The following table provides a reconciliation of the all-in
sustaining by-product cash cost per gold ounce on a by-product basis to the
consolidated financial statements:

|                                                                       | Three months ended | Years ended 
|---------------------------------------------------------------------- | ------------------ | ------------
|                                                                       | December 31,       | December 31,
|                                                                       |                    | 2013        
|Production costs                                                       | $                  | 24,453      
|Unprocessed ore stockpile mining costs
      (1)                       |                    | 343         
|Corporate and administrative
      expenses                            |                    | 2,516       
|Sustaining capital expenditures                                        |                    | 1,561       
|Accretion for site
      reclamation and closure                       |                    | 11          
|Less: By-product silver credits                                        |                    | (407        
|All-in sustaining cash costs                                           |                    | 28,477      
|Divided by gold sold (oz)                                              |                    | 33,247      
|All-in sustaining cash cost per gold ounce on a
      by-product basis | $                  | 857         

|(1) | For the three months ended December 31, 2013 and year
      then ended, the mining costs capitalized to non-current unprocessed ore
      stockpile were $0.3 million and $2.5 million respectively (three months
      ended December 31, 2012 and year then ended - $1.1 million and $5.9
      million, respectively).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusted earnings and total comprehensive
income

The Company has included the non-GAAP performance measure of
adjusted earnings and total comprehensive income and adjusted earnings and total
comprehensive income per share throughout this MD&A. Items are adjusted
where Management deems them unusual or non-recurring in nature based on the
historical and future performance of the Company.

The Company believes this measure to be representative of the
true earnings and total comprehensive income; however, this performance measure
has no standardized meaning. As such, there are likely to be differences in the
method of computation when compared to similar measures presented by other
issuers. Management believes that, in addition to conventional measures,
prepared in accordance with GAAP, certain investors use this information to
evaluate the Companys performance. Accordingly, it is intended to provide
additional information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP.

19

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

|                                                                 | Three months ended | Years ended 
|---------------------------------------------------------------- | ------------------ | ------------
|                                                                 | December 31,       | December 31,
|                                                                 |                    | 2013        
|(Loss) Earnings and total
      comprehensive income             | $                  | (4,684      
|Impairment of non-current unprocessed ore
      stockpile        |                    | 794         
|Deferred tax expense related to SMD                              |                    | 8,605       
|Adjusted
      earnings and total comprehensive income           | $                  | 4,715       
|Adjusted earnings and total comprehensive income
      per share | $                  | 0.03        

Additional GAAP Measures

The Company has included additional GAAP measures which include
earnings from mine operations and earnings from operations throughout this
document. Management believes that, in addition to conventional measures
prepared in accordance with GAAP, certain investors use this information to
evaluate the Companys performance. Accordingly, they are intended to provide
additional information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP.

Earnings from mine operations

Earnings from mine operations represents the difference between
metal revenues and cost of sales (including depreciation and depletion).
Management believes that this presentation provides useful information to
investors to evaluate the Companys mine operating performance and to assess the
Companys ability to generate operating cash flow.

Earnings from operations

Earnings from operations represents the difference between
earnings from mine operations, corporate and administrative expenses and
impairment charges. Management believes that this presentation provides useful
information to investors to evaluate the Companys mine operating performance
when also taking into account certain costs not directly associated with
production.

The additional GAAP measures described above do not have a
standardized meaning prescribed by IFRS. As such, there are likely to be
differences in the method of computation when compared to similar measures
presented by other issuers.

|OFF-BALANCE
      SHEET ARRANGEMENTS
|------------------------------------

The Company does not have any off-balance sheet arrangements.

|INTERNATIONAL
      FINANCIAL REPORTING STANDARDS
|-------------------------------------------------

The consolidated financial statements have been prepared in
accordance with IFRS as issued by the IASB, effective as of December 31, 2013.
The Companys significant accounting policies are described in note 3 of the
Companys consolidated financial statements for the years ended December 31,
2013 and 2012.

|CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES
|------------------------------------------------

The preparation of the Companys consolidated financial
statements in conformity with IFRS requires management to make estimates based
on assumptions about future events that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period.

20

---

|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
prospectively in the period in which the estimate is revised.

Management has made the following critical judgements and estimates:

Critical judgements in applying accounting policies

The critical judgements that the Company’s management has made in the process of applying the Company’s accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognized in the
Company’s consolidated financial statements are as follows:

Functional currency

The functional currency of each entity is determined after consideration of the primary economic environment of the entity, and is reviewed when primary indicators change. The Company considers the impact of changes to primary indicators such as the
commencement of commercial operations and/or a significant increase in sales in a currency other than the established functional currency. Changes to a primary indicator which are considered to be both substantive and ongoing may result in applying
a change in functional currency to the respective entity.

Key sources of estimation uncertainty

The significant assumptions about the future and other major sources of estimation uncertainty at the end of the reporting period that have a significant risk of resulting in a material adjustment to the carrying amounts of the Company’s
assets and liabilities are as follows:

Impairments

The Company assesses its mining interest assets annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of
the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating
performance.

Mineral reserves

Proven and probable mineral reserves are the economically mineable parts of the Company’s measured and indicated mineral resources demonstrated by at least a preliminary feasibility study. The Company estimates its proven and probable reserves
and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons.

The information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgements to interpret the data. The estimation of future cash flows related to proven and probable reserves is based upon
factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and production costs along with geological assumptions and judgements made in estimating the recovery rate, size and grade of the ore body.

Changes in the proven and probable reserves or measured, indicated and inferred mineral resource estimates may impact the carrying value of exploration and evaluation properties, plant and equipment, site reclamation and closure provisions,
recognition of deferred tax amounts and depreciation and depletion.

Depreciation and depletion

Plants and other facilities used directly in mining activities are depreciated using the units-of-production (“UOP)
method over a period not to exceed the estimated life of the ore body based on
recoverable ounces to be mined from proven and probable reserves.

21

---

|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Mobile and other equipment are depreciated, net of residual value, on a
straight-line basis, over the useful life of the equipment to the extent that
the useful life does not exceed the related estimated life of the mine based on
proven and probable reserves. The calculation of the UOP rate, and therefore the annual depreciation and depletion expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of actual future
production differing from current forecasts of future production, expansion of mineral reserves through exploration activities, differences between estimated and actual recovery rates and costs of mining and differences in gold price used in the
estimation of mineral reserves.

Significant judgement is involved in the estimation of useful life and residual values for the computation of depreciation and depletion and no assurance can be given that actual useful lives and residual values will not differ significantly from
current assumptions.

Deferred stripping costs

In determining whether stripping costs incurred during the production phase of a mining property relate to reserves and resources that will be mined in a future period and therefore should be capitalized, the Company makes estimates of the stripping
activity over the life of the mining property (“life of mine strip ratio”). Changes in estimated life of mine strip ratios can result in a change to the future capitalization of stripping costs incurred. At December 31, 2013, the
carrying amount of stripping costs capitalized was $34.2 million.

Inventories

Expenditures incurred, and depreciation and depletion of assets used in mining and processing activities are accumulated as the cost of ore in stockpiles, ore in process and finished metal inventory. These amounts are carried at the lower of average
cost or NRV and subject to significant measurement uncertainty.

Write-downs of ore in stockpile, ore in process, and finished metal inventory resulting from NRV impairments are reported as a component of current period costs. The primary factors that influence the need to record write-downs include prevailing
and long-term metal prices and prevailing costs for production inputs such as labour, fuel and energy, materials and supplies, as well as realized ore grades and actual production levels.

Costs are attributed to the ore in process based on current mining costs, including applicable depreciation and depletion relating to mining operations incurred up to the point of placing the ore on the leach pad. Costs are removed from ore in
process based on the average cost per estimated recoverable ounce of gold on the leach pad as the gold is recovered. Estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the pads, the grade of ore
placed on the leach pads and an estimated percentage of recovery. Timing and ultimate recovery of gold contained on leach pads can vary significantly from the estimates.

The quantities of recoverable gold placed on the leach pads are reconciled to the quantities of gold actually recovered (metallurgical balancing), by comparing the grades of ore placed on the leach pads to actual ounces recovered. The nature of the
leaching process inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time. The ultimate
recovery of gold from a pad will not be known until the leaching process is completed.

The allocation of costs to ore in stockpile, ore in process, and finished metal inventory and the determination of NRV involve the use of estimates. There is a high degree of judgement in estimating future costs, future production levels, proven and
probable reserves estimates, gold prices, and the ultimate estimated recovery for ore in process. There can be no assurance that actual results will not differ significantly from estimates used in the determination of the carrying value of
inventories.

Provision for site reclamation and closure

Site reclamation and closure provisions are recognized in the period in which they arise and are stated as the present value of estimated future costs. These estimates require extensive judgement about the nature, cost and timing of the work to be
completed, and may change with future changes to costs, environmental laws and regulations and remediation practices. In
view of uncertainties concerning environmental rehabilitation, the ultimate costs could be materially different from the amounts estimated.

22

---

|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The estimates of a future site reclamation and closure provision are subject to change based on amendments to applicable laws and legislation. Future changes in site reclamation and closure provisions, if any, could have a significant impact and
would be reflected prospectively, as a change in accounting estimate.

Deferred taxes

The Company’s provision for income taxes is estimated based on the expected annual effective tax rate. The current and deferred components of income taxes are estimated based on forecasted movements in temporary differences. Changes to the
expected annual effective tax rate and differences between the actual and expected effective tax rate and between actual and forecasted movements in temporary differences will result in adjustments to the Company’s provision for income taxes
in the period changes are made and/or differences are identified.

In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary
differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively
verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction.

Forecasted cash flows from operations are based on life of mine projections internally developed and reviewed by management. Weight is attached to tax planning opportunities that are within the Company’s control, and are feasible and
implementable without significant obstacles. The likelihood that tax positions taken will be sustained upon examination by applicable tax authorities is assessed based on individual facts and circumstances of the relevant tax position evaluated in
light of all available evidence.

Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. At
the end of each reporting period, the Company reassesses unrecognized income tax assets.

Share-based payments

Share-based payments are measured at fair value. Share options and share purchase warrants are measured using the Black-Scholes option pricing model based on estimated fair values of all share-based awards at the date of grant and is expensed to
earnings or loss from operations over each award’s vesting period. The Black-Scholes option pricing model utilizes subjective assumptions such as expected price volatility and expected life of the option. Changes in these input assumptions can
significantly affect the fair value estimate.

Contingencies

Due to the nature of the Company’s operations, various legal and tax matters can arise from time to time. In the event that management’s estimate of the future resolution of these matters changes, the Company will recognize the effects
of the changes in its consolidated financial statements for the period in which such changes occur.

In the fourth quarter of 2012, the Mexican government amended the Federal labour law regarding subcontracting arrangements in order to prevent the use of service companies to evade labour and tax obligations. As is common place, the Company
currently operates in Mexico using these subcontracting arrangements. The amendments set forth by the Mexican government also include certain regulatory requirements regarding an employer’s obligation to compensate employees with appropriate
statutory profit sharing within the country.

The Company has assessed the implications of these amendments and has determined that, other than what is presently recorded, it is probable that no additional obligation for statutory profit sharing payments is required to be recorded in the
Company’s consolidated financial statements as at and for the year ended December 31, 2013.

23

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

|CHANGES IN
      ACCOUNTING STANDARDS
|-------------------------------------

The Company has applied new and revised IFRS standards in the
consolidated financial statements and has recast the 2012 comparative periods as
disclosed in note 4a)ii to the consolidated financial statements. The most
significant of these standards is the following:

Stripping costs in the production phase of a surface
mine

In October 2011, the International Accounting Standards Board
(IASB) issued IFRIC 20- Stripping Costs in the Production Phase of a
Surface Mine (IFRIC 20). IFRIC 20 clarifies the requirements for
accounting for the costs of stripping activity in the production phase when two
benefits accrue: (i) usable ore that can be used to produce inventory; and (ii)
improved access to further quantities of material that will be mined in future
periods. IFRIC 20 includes guidance on transition for pre-existing stripping
assets.

The Company has determined that the impact of the above
standard is material to its consolidated financial statements due to changes to
significant estimates and assumptions concerning componentization,
capitalization, and depletion, as well as the elimination of pre-existing
stripping assets that no longer existed at the start of the comparative period.

The adoption of the standard had the following impact on the
consolidated statements of financial position at January 1, 2012 and at December
31, 2012:

|                                                                              |   | At January 1, 2012 |  |   |            |   |   | At December 31,
      2012 | 
|----------------------------------------------------------------------------- | - | ------------------ |  | - | ---------- | - | - | -------------------------- | 
|                                                                              |   | As                 |  |   |            |   |   |                            | 
|                                                                              |   | Previously         |  |   | IFRIC 20   |   |   | Adjusted                   | 
|                                                                              |   | Reported           |  |   | Adjustment |   |   | Balance                    | 
|Inventories                                                                   | $ | 29,183             |  | $ | -          |   | $ | 29,183                     | 
|Mineral properties, plant and equipment, exploration and
      evaluation (1) | $ | 107,677            |  | $ | (1,985     | ) | $ | 105,692                    | 
|Total assets                                                                  |   | 162,220            |  |   | (1,985     | ) |   | 160,235                    | 
|Deferred tax liabilities                                                      | $ | 22,562             |  | $ | (566       | ) | $ | 21,996                     | 
|Retained earnings                                                             | $ | 9,801              |  | $ | (1,419     | ) | $ | 8,382                      | 

|(1) | The impact of IFRIC 20 applies to the deferred stripping
      balance previously disclosed of $25.2 million at December 31, 2012
      (January 1, 2012 - $21.3 million). The adjustment shown is the change to
      the deferred stripping balance, net of accumulated
  depreciation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---

|TIMMINS GOLD CORP.                                                                
|----------------------------------------------------------------------------------
|Managements Discussion and Analysis                                              
|For the years ended December 31, 2013 and 2012                                    
|(in United
      States dollars, tabular amounts in thousands, except where noted)

The adoption of the standard had the following impact on the
consolidated statements of earnings and total comprehensive income for the year
ended December 31, 2012:

|                                        |   | Year ended December
      31, 2012 | 
|--------------------------------------- | - | ---------------------------------- | 
|                                        |   | As                                 | 
|                                        |   | previously                         | 
|                                        |   | reported                           | 
|Cost of sales (1)                       | $ | 79,579                             | 
|Earnings before income taxes            | $ | 57,139                             | 
|Deferred tax expense                    |   | 6,919                              | 
|Earnings and total comprehensive income | $ | 36,068                             | 

|(1) | Cost of sales includes depreciation and depletion. The
      decrease of $2.3 million for the year ended December 31, 2012 cost of
      sales includes a reduction of $3.8 million to costs of contract mining and
      a $1.5 million increase to depreciation and
depletion.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The adoption of the standard had the following impact on the
consolidated statements of cash flows for the year ended December 31, 2012:

|                                      |   | Year ended December
      31, 2012 |  
|------------------------------------- | - | ---------------------------------- | -
|                                      |   | As                                 |  
|                                      |   | previously                         |  
|                                      |   | reported                           |  
|Earnings before income taxes          | $ | 57,139                             |  
|Depletion and depreciation            | $ | 7,934                              |  
|Inventories                           |   | (10,167                            | )
|Cash provided by operating activities | $ | 46,869                             |  
|Cash used in investing activities     | $ | (34,339                            | )
|Cash provided by financing activities | $ | 1,782                              |  

|CONTROLS AND
      PROCEDURES
|-----------------------------

Disclosure controls and procedures

The Companys Chief Executive Officer (CEO) and Chief
Financial Officer (CFO) are responsible for establishing and maintaining
adequate disclosure controls and procedures. Disclosure controls and procedures
are designed to provide reasonable assurance that material information related
to the Company, including its consolidated subsidiaries, is made known to the
Companys certifying officers. The Companys CEO and CFO have concluded that the
Companys disclosure controls and procedures are effective in providing
reasonable assurance that information required to be disclosed under applicable
securities regulations is recorded, processed, summarized and reported within
the time periods specified.

Management regularly reviews the Companys disclosure controls
and procedures however, they cannot provide an absolute level of assurance
because of the inherent limitations in cost effective control systems to prevent
or detect all misstatements due to error or fraud.

At December 31, 2013, under the supervision and with the
participation of the Companys CEO and CFO, management conducted an evaluation
of the design and operating effectiveness of the Companys disclosure controls
and procedures. Based on this evaluation, management concluded that the
Companys disclosure controls and procedures are effective as of that date.

25

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with IFRS. The Company uses the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) internal control framework to design internal controls over financial reporting.

Internal control over financial reporting includes those policies and procedures that:

| | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Timmins Gold Corp.;                                                                                                                                                              
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with IFRS, and that receipts and expenditures of Timmins Gold Corp. are being made only in accordance
with authorizations of management and directors of Timmins Gold Corp.; and
| | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Timmins Gold Corp.’s assets that could have a material effect on the consolidated financial statements.                                                                                                  

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.

At December 31, 2013, under the supervision and with the participation of our CEO and CFO, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting. Based its evaluation, management
concluded that the Company’s internal control over financial reporting was effective as of that date.

There has been no change in the Company’s internal control over financial reporting during the year ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting.

|RISKS AND UNCERTAINTIES
|-----------------------

Risk Factors Relating to the Company’s Business

The Company’s revenue is derived primarily from the sale of gold, and therefore decreases in the price of gold may cause the Company’s revenue to decrease substantially.

The majority of the Company’s revenue is derived from the sale of gold, and therefore fluctuations in the price of gold represent one of the most significant factors affecting the Company’s operations and profitability. To a lesser
extent, the Company also generates revenue from other by-product or co-product metals, such as silver. The price of gold and other commodities has fluctuated widely in recent years and is affected by numerous factors beyond the Company’s
control, including:

| | levels of supply and demand;                                                                 
|- | ---------------------------------------------------------------------------------------------
| | global or regional consumptive patterns;                                                     
| | sales by government holders;                                                                 
| | metal stock levels maintained by producers and others;                                       
| | increased production due to new mine developments and improved mining and production methods;
| | speculative activities;                                                                      
| | inventory carrying costs;                                                                    
| | availability and costs of metal substitutes;                                                 
| | international economic and political conditions;                                             
| | interest rates;                                                                              
| | currency values; and                                                                         
| | inflation.                                                                                   

The market price of gold and other metals may decline from current levels. Declining market prices for gold or other metals could materially adversely affect the Company’s operations and profitability.

26

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Further, a decline in the market price of gold may also require the Company to write-down its mineral reserves, which would have a material adverse effect on its earnings and profitability. The Company currently does not enter into forward contracts
with respect to or otherwise hedge its potential future gold sales.

The Company’s inability to access additional capital could have a negative impact on its growth strategy.

The Company currently has limited financial resources and operating income, and adequate funding may not be available to further its exploration and development projects. The Company may need to raise additional capital to fund its operations, and
such capital may not be available on commercially acceptable terms, if at all.

If the Company is unable to obtain additional capital on commercially acceptable terms, the Company may be forced to reduce or curtail its operations or its anticipated exploration activities. Although the Company has been successful in the past in
financing its activities through the sale of equity securities, it may not be able to obtain sufficient financing in the future. Our ability to arrange additional financing in the future will depend, in part, on the prevailing capital market
conditions as well as the business performance of the Company.

The Company operates in a highly competitive industry with many large competitors, and it expects that competition may intensify in the future.

The gold mining industry is intensely competitive, and the Company competes with other companies that have greater financial and human resources and technical facilities. Competition is primarily for mineral-rich properties which can be developed
and produced economically; the technical expertise to find, develop, and produce such properties; the labor and equipment to operate such properties; and the capital to finance the development of such properties. Many of the Company’s
competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a worldwide basis and have far greater financial and technical resources than the Company.

In addition, the high price of gold is encouraging new entrants to start competing companies and established companies to expand gold mining operations significantly. Such competition may result in the Company being unable to acquire desired
properties, recruit or retain qualified employees or acquire the capital necessary to fund its operations and develop its properties, which could have an adverse effect on our results.

The Company has a limited operating history and therefore cannot ensure the long-term successful operation of its business or the execution of its business plan.

The Company was incorporated on March 17, 2005 and commenced commercial production on April 1, 2010. As a result, the Company has a limited operating history upon which stakeholders may evaluate its proposed business and prospects. The
Company’s existing and proposed business operations will be subject to numerous risks, uncertainties, and expenses. Difficulties associated with early stage extractive operations and the exploration and development of new mineral properties,
are more fully described within other sections of risks and uncertainties faced by the Company.

The Company is subject to particular risks associated with doing business in Mexico, any of which could result in additional costs to the Company and cause its operating results to suffer.

The Company’s only operating mine and all of its exploration properties are located in Mexico. In the past, Mexico has been subject to a number of risks and uncertainties, including:

| | terrorism and hostage taking;                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------
| | expropriation or nationalization without adequate compensation;                                                                      
| | difficulties enforcing judgements obtained in Canadian or United States courts against assets located outside of those jurisdictions;
| | labor unrest;                                                                                                                        
| | high rates of inflation;                                                                                                             
| | changes to royalty and tax regimes;                                                                                                  
| | substantial fluctuations in currency exchange rates;                                                                                 
| | volatile local political and economic developments;                                                                                  

27

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

| | difficulty understanding and complying with the regulatory and legal framework respecting the ownership and maintenance of mineral properties, mines and mining operations; and
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | difficulty obtaining key equipment and components for equipment.                                                                                                               

Any of these factors, among others, may cause changes in the existing business or regulatory environment in Mexico with respect to mineral exploration and mining activities, which could result in additional costs to the Company and thereby cause its
operating results to suffer.

In addition, the enforcement by the Company of its legal rights to exploit its properties may not be recognized by the government of Mexico or by its court system.

These risks, along with any variation from the current regulatory, economic and political climate may limit or disrupt the Company’s operations, restrict the movement of funds or result in the deprivation of contractual rights.

The Company’s business is subject to various governmental regulations, and compliance with these regulations may cause the Company to incur significant expenses. If the Company fails to maintain compliance with applicable regulations, it
may be forced to pay fines, be subject to civil penalties or be forced to temporarily halt or cease operations.

The Company’s business is subject to a variety of federal, state, provincial and local laws and regulations in Mexico and Canada, including:

| | environmental protection;                                                     
|- | ------------------------------------------------------------------------------
| | management and use of toxic substances and explosives;                        
| | management of natural resources;                                              
| | exploration, development, production and post-closure reclamation of mines;   
| | imports and exports;                                                          
| | price controls or production restrictions;                                    
| | taxation;                                                                     
| | mining royalties;                                                             
| | labor standards and occupational health and safety, including mine safety; and
| | historical and cultural preservation.                                         

The Company’s activities relating to the Mine are subject to, among other things: regulations promulgated by SEMARNAP, Mexico’s environmental protection agency; DGM, the Mexican Department of Economy - Director General of Mines; and the
regulations of CONAGUA, the Comision Nacional del Agua with respect to water rights. Mexican regulators have broad authority to shut down and/or levy fines against facilities that do not comply with regulations or standards.

The costs associated with compliance with these laws and regulations are substantial and possible future laws and regulations, changes to existing laws and regulations or more stringent enforcement of current laws and regulations by governmental
authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of the Company’s operations and delays in the development of its properties. Moreover, these laws and regulations may allow governmental
authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety impacts of the Company’s past and current operations, or possibly even those actions of
parties from whom the Company acquired its properties, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. It is difficult to strictly comply with all regulations imposed on the Company, and even
with the application of considerable care the Company may inadvertently fail to comply with certain laws. Such events can lead to fines, penalties, loss, reduction or expropriation of entitlements, the imposition of additional local or foreign
parties as joint venture partners and other material negative impacts on the Company.

28

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

If the Company is unable to hire, train, deploy and manage qualified personnel in a timely manner, particularly in Mexico, its ability to manage and grow its business will be impaired.

Recruiting and retaining qualified personnel is critical to the Company’s success. The Company is dependent on the services of key executives including our President and Chief Executive Officer and other highly skilled and experienced
  executives and personnel focused on managing the Company’s interests. The number of persons skilled in acquisition, exploration and development of mineral properties is limited and competition for such persons is intense. As the
  Company’s business activity grows, the Company will require additional key financial, administrative and mining personnel as well as additional operations staff, particularly in Mexico. The Company may not be successful in attracting, training
  and retaining qualified personnel as competition for persons with these skill sets increases. If the Company is not successful in attracting, training and retaining qualified personnel, the efficiency of its operations could be impaired, which could
  have an adverse impact on its future cash flows, earnings, results of operations and financial condition.

It may be particularly difficult to find or hire qualified personnel in the mining industry who are situated in Mexico, to obtain all of the necessary services or expertise in Mexico, or to conduct operations on the Company’s projects at
reasonable rates.

If qualified personnel cannot be obtained in Mexico, the Company may need to obtain those services outside of Mexico, which will require work permits and compliance with applicable laws and could result in delays and higher costs to the Company.

The Company may be unable to obtain or renew required government permits, or may only be able to do so at significant expense, which may harm its operating results.

In the ordinary course of business, the Company is required to obtain and renew governmental permits and licenses for the operation and expansion of existing operations or for the development, construction and commencement of new operations.
Obtaining or renewing the necessary governmental permits and licenses is a complex and time-consuming process, often involving public hearings and costly undertakings on the Company’s part.

The duration and success of the Company’s efforts to obtain and renew permits and licenses are contingent upon many variables not within its control, including the interpretation of applicable requirements implemented by the permitting
authority.

The Company may not be able to obtain or renew permits or licenses that are necessary to its operations, or the cost to obtain or renew permits or licenses may exceed what the Company believes it can recover from a given property once in production.
Any unexpected delays or costs associated with the permitting and licensing process, including challenges to the terms of such permits or licenses, whether successful or unsuccessful, could delay the development or impede the operation of a mine,
which could adversely impact the Company’ operations and profitability.

In order for the Company to carry out its mining activities, its exploitation licenses must be kept current. There is no guarantee that the Company’s exploitation licenses will be extended or that new exploitation licenses will be granted. In
addition, such exploitation licenses could be changed and applications to renew existing licenses may not be approved. The Company may also be required to contribute to the cost of providing the required infrastructure to facilitate the development
of its properties, and will also be required to obtain and comply with permits and licenses that may contain specific conditions concerning operating procedures, water use, waste disposal, spills, environmental studies, abandonment and restoration
plans and financial assurances. The Company may not be able to comply with any such conditions.

Failure to discover new reserves, maintain or enhance existing reserves or develop new operations could negatively affect the Company’s future results and financial condition.

The long-term operation of the Company’s business and its profitability is dependent, in part, on the cost and success of its exploration and development programs. Most of the Company’s properties are in the exploration and development
stages and only the San Francisco property has a mineralization considered a probable mineral reserve pursuant to CIM standards. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately
developed into producing mines.

The Companys mineral exploration and development programs may not result in any
discoveries of bodies of commercially viable mineralization, and even if
commercial quantities of mineralization are discovered, the Company may not be
able to bring the mineral property into commercial production. Development of
the Companys mineral properties will follow only upon obtaining satisfactory
exploration results. Discovery of mineral deposits is dependent upon a number of
factors, not the least of which is the technical skill of the exploration
personnel involved.

29

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The commercial viability of a mineral deposit once discovered is also dependent
upon a number of factors, some of which are the particular attributes of the
deposit (such as size, grade and proximity to infrastructure), metal prices,
anticipated capital and operating costs and government regulations, including
regulations relating to royalties, allowable production, importing and exporting
of minerals and environmental protection. Most of the above factors are beyond
the Companys control.

As a result, the Company’s acquisition, exploration and development programs may not yield new reserves to replace or expand current reserves. Unsuccessful exploration or development programs could have a material adverse impact on the
Company’s operations and profitability.

In addition, the Company’s ability to sustain its present levels of gold production is dependent upon the identification of additional reserves at the Mine. If the Company is unable to develop new ore bodies, it may not be able to sustain or
increase present production levels. Reduced production would have a material and adverse impact on future cash flows, results of operations and financial condition.

The Company is subject to various operating risks and hazards associated with its exploration and mining operations, any of which could cause it to incur substantial expenses or affect the economic feasibility of its projects. The Company may
be unable to insure against such risks, or to insure against such risks at a reasonable cost.

The ownership, operation and development of a mine or mineral property involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. These risks include:

| | environmental hazards;                                                                                                  
|- | ------------------------------------------------------------------------------------------------------------------------
| | industrial accidents, explosions and third party accidents;                                                             
| | the encountering of unusual or unexpected geological formations;                                                        
| | ground falls, rock bursts, cave-ins and seismic activity including earthquakes;                                         
| | fires and flooding;                                                                                                     
| | metallurgical and other processing problems, including the availability and costs of processing and refining facilities;
| | availability of economic sources of power;                                                                              
| | variations in grade, deposit size, density and other geological problems;                                               
| | unanticipated adverse geotechnical conditions;                                                                          
| | incorrect data on which engineering assumptions are made;                                                               
| | mechanical equipment performance problems;                                                                              
| | unavailability or significant changes in the cost of materials and equipment including fuel;                            
| | labor force disruptions;                                                                                                
| | title claims, including aboriginal land claims;                                                                         
| | unanticipated transportation costs; and                                                                                 
| | periodic interruptions due to inclement or hazardous weather conditions.                                                

These occurrences could result in:

| | environmental damage and liabilities;                                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | work stoppages, delayed production and resultant losses;                                                                                                                    
| | increased production costs;                                                                                                                                                 
| | damage to, or destruction of, mineral properties or production facilities and resultant losses;                                                                             
| | asset write downs;                                                                                                                                                          
| | monetary losses;                                                                                                                                                            
| | claims for compensation of loss of life and/or damages in connection with accidents that occur on company property, and punitive awards in connection with those claims; and
| | other liabilities.                                                                                                                                                          

These factors, among others, may cause anticipated capital and operating costs, production and economic returns, or other estimates to differ significantly from the Company’s actual capital and operating costs. It is not always possible to
fully insure against such risks and the Company may decide not to insure against such risks due to high premiums or for other reasons. Should any such uninsured liabilities arise, they could adversely impact the Company’s profitability.

30

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The Company’s operations are dependent on the accessibility and reliability of existing local infrastructure, and its exploration activities are dependent upon adequate infrastructure being available in the future.

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs.
The lack of availability on acceptable terms or the delay in the availability of any one or more of these items could prevent or delay exploitation or development of the Company’s projects. If adequate infrastructure is not available in a
timely manner, the exploitation or development of the Company’s projects may not be commenced or completed on a timely basis, if at all.

In addition, the resulting operations may not achieve the anticipated production volume, or the construction costs and ongoing operating costs associated with the exploitation and/or development of the Company’s advanced projects will be
higher than anticipated. In addition, unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect the Company’s operations and profitability.

The Company is subject to extensive environmental regulation, and any failure of compliance could result in fines or government sanctions, civil liabilities and damage to its reputation.

All phases of the Company’s operations are subject to environmental laws and regulations. These laws and regulations set certain standards regarding health and environmental quality, and provide for penalties and other liabilities for
violations, as well as obligations to rehabilitate current and former properties in certain circumstances.

Furthermore, operating permits could be temporarily withdrawn where there is evidence of serious breaches of health and safety, or even permanently, in the case of extreme breaches. Significant liabilities could be imposed on the Company for
damages, clean-up costs or penalties in the event of certain discharges into the environment, environmental damage caused by previous owners of acquired properties or noncompliance with environmental laws.

In addition, environmental legislation in Mexico is generally evolving in a manner which will require stricter standards and will be subject to increased enforcement, fines and penalties for non-compliance, more stringent environmental assessments
of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Such changes in environmental regulation, if any, may adversely impact the Company’s operations and profitability.

Land reclamation requirements may be burdensome.

Land reclamation requirements are generally imposed on companies with mining operations in order to minimize the long term effects of land disturbance, and the Company is subject to such requirements at its mineral properties. Reclamation
obligations include requirements to:

| | control dispersion of potentially harmful effluents; and          
|- | ------------------------------------------------------------------
| | reasonably re-establish pre-disturbance land forms and vegetation.

In order to carry out reclamation obligations arising from exploration and development activities, the Company must allocate financial resources that might otherwise be spent on further exploration and development programs. If the Company is
required to carry out unanticipated reclamation work, its financial position could be adversely affected.

The Company’s production and exploration depend on its ownership of, or control over, the properties on which it operates, and maintaining existing property rights or obtaining new rights is a highly competitive and costly process.

The Company’s ability to carry out successful mining activities will depend in part on its ability to obtain tenure to its properties to the satisfaction of international lending institutions.

The issue of any such licenses must be in accordance with Mexican law and, in particular, relevant mining legislation. The validity of mining or exploration titles or claims or rights, which constitute most of the Company’s property holdings,
can be uncertain and may be contested.

31

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The Company has used reasonable commercial efforts to investigate its title or claims to its various properties and, to its knowledge, except where it has otherwise identified, those titles or claims to material properties are in good standing.
However, the Company has not conducted surveys of all the claims in which it holds direct or indirect interests and therefore, the precise area and location of such claims may be in doubt. The Company’s properties may also be subject to prior
unregistered liens, agreements or transfers, native land claims or undetected title defects. The Mexican government may revoke or significantly alter the conditions of the applicable exploration and mining titles or claims, and such exploration and
mining titles or claims may be challenged or impugned by third parties, which could materially impact the Company’s rights to its various properties or interests. Title insurance is generally not available for mineral properties, and the
Company’s ability to ensure that it has obtained secure claims to individual mineral properties or mining concessions may be severely constrained.

Mines have limited lives and, as a result, the Company continually seeks to replace and expand reserves through the acquisition of new properties.

In addition, there is a limited supply of desirable mineral lands available in areas where the Company would consider conducting exploration and/or production activities. Because the Company faces strong competition for new properties from other
mining companies, some of which have greater financial resources than it does, the Company may be unable to acquire attractive new mineral properties on terms that it considers acceptable. Competition in the mining business for limited sources of
capital could adversely impact the Company’s ability to acquire and develop suitable mines, developmental projects or properties having significant exploration potential. As a result, the Company’s acquisition and exploration programs
may not yield new mineral reserves to replace or expand current mineral reserves.

The process of estimating mineral reserves and resources is subject to inherent uncertainties, and reported reserves may not accurately reflect the economic viability of the Company’s properties.

There is a degree of uncertainty attributable to the calculation of mineral reserves and mineral resources. Until mineral reserves or mineral resources are actually mined and processed, the quantity of mineral and reserve grades must be considered
as estimates only. Levels of metals indicated by such mineral reserves or mineral resources may not be produced, and the Company may not receive the price assumed in determining its reserves.

These estimates are expressions of judgement based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While the
Company believes that the reserve and resource estimates included in this MD&A are well established and reflect management’s best estimates, by their nature reserve and resource estimates are imprecise and depend, to a certain extent, upon
analysis of drilling results and statistical inferences that may ultimately prove unreliable.

Furthermore, fluctuations in the market price of metals, as well as increased capital or production costs or reduced recovery rates may render ore reserves uneconomic and may ultimately result in a reduction of reserves. The extent to which
resources may ultimately be reclassified as proven or probable reserves is dependent upon the demonstration of their profitable recovery. The evaluation of reserves or resources is always influenced by economic and technological factors, which may
change over time. Resource estimates may not ultimately be reclassified as proven or probable reserves. If the Company’s reserve or resource figures are inaccurate or are reduced in the future, this could have an adverse impact on its future
cash flows, earnings, results of operations and financial condition.

In estimating its reserves and resources, the Company relies on laboratory-based recovery models to project estimated recoveries by ore type at optimal crush sizes. Actual gold recoveries in a commercial heap leach operation may exceed or fall short
of projected laboratory test results. In addition, the grade of mineralization ultimately mined may differ from the one indicated by the drilling results and the difference may be material.

Production can be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations, inaccurate or incorrect geological, metallurgical
or engineering work and work interruptions, among other things. Short term factors, such as the need for an orderly development of deposits or the processing of new or different grades, may have an adverse effect on mining operations or the results
of those operations.

32

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Minerals recovered in small scale laboratory tests may not be duplicated in large scale tests under on-site conditions or in production-scale operations. Material changes in proven and probable reserves or resources, grades, waste-to-ore ratios or
recovery rates may affect the economic viability of projects. The estimated proven and probable reserves and resources the Company discloses should not be interpreted as assurances of mine life or of the profitability of future operations.

The Company has engaged expert independent technical consultants to advise it on, among other things mineral reserves and resources and project engineering at the Mine. The Company believes these experts are competent and that they have and will
carry out their work in accordance with all internationally recognized industry standards. If, however, the work conducted and to be conducted by these experts is ultimately found to be incorrect or inadequate in any material respect, the Company
may experience delays and increased costs.

The process of estimating future mine production and related costs are subject to inherent uncertainties, and actual results may differ materially from such estimates.

The Company periodically prepares estimates of future mine production and future production costs for the Mine. There can be no assurance that the Company will achieve these production estimates.

These production estimates are dependent on, among other things: the accuracy of underlying mineral reserve estimates; the accuracy of assumptions regarding ore grades and recovery rates; ground conditions and physical characteristics of ores;
equipment and mechanical availability; labor availability; facilities and infrastructure; having sufficient materials and supplies on hand; and the accuracy of estimated rates and costs of mining and processing.

Failure to achieve production estimates could have a material and adverse effect on any or all of the Company’s future cash flows, results of operations and financial condition.

The Company’s actual production and costs may vary from its estimates for a variety of reasons, including: actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating
factors, such as the need for sequential development of ore bodies and the processing of new or different ore grades from those planned; and the risks and hazards associated with mining described throughout the “Risk Factors Relating to the
Company’s Business”. In addition, metal recoveries in small scale laboratory tests may not be duplicated in larger scale tests under on-site conditions or during production, and known and experienced recoveries may not continue.

Costs of production may also be affected by changing stripping ratios, ore grade metallurgy, labor costs, costs of supplies and services (such as fuel and power), general inflationary pressures and currency exchange rates. Failure to achieve cost
estimates could have a material and adverse effect on any or all of the Company’s future cash flows, results of operations and financial condition.

The expansion and development of the Company’s mineral properties is uncertain and subject to risk.

The development of the Company’s properties that are found to be economically feasible will require the expansion and improvement of existing mining operations, as well as the construction and operation of additional mines, processing plants
and related infrastructure. As a result, the Company is subject to all of the risks associated with establishing and expanding mining operations and business enterprises including:

| | the timing and cost, which will be considerable, of the construction of additional mining and processing facilities;                                           
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the availability and costs of skilled labor, power, water, transportation and mining equipment;                                                                
| | the availability and cost of appropriate smelting and/or refining arrangements;                                                                                
| | the need to obtain necessary environmental and other governmental approvals, permits and licenses, and the timing of those approvals, permits and licenses; and
| | the availability of funds to finance construction and development activities.                                                                                  

It is not unusual in new mining operations to experience unexpected problems and delays during the construction and development of a mine. In addition, delays in the commencement or expansion of mineral production often occur and, once commenced or
expanded, the production of a mine may not meet expectations or estimates set forth in feasibility or other studies. Accordingly, the Company may not be able to successfully develop and expand mining operations or profitably produce precious metals
at its exploration or development-stage properties.

33

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The Company’s results may be negatively affected by currency exchange rate fluctuations.

Fluctuations in currency exchange rates, particularly the weakening or strengthening of the US dollar (being the currency in which the Company’s products are sold) against the Mexican peso (being the currency in which the majority of the
Company’s capital and operating costs are incurred), could have a significant impact on the Company’s results of operations. The Company does not currently have a formal policy of actively managing such currency fluctuations, and
therefore, such fluctuations may have a significant impact on its financial results in any given period.

Some of the Company’s directors and officers have interests that may be different than the Company’s interests.

Some of the Company’s directors and officers are engaged and will continue to be engaged in the search for additional business opportunities on behalf of other companies, and situations may arise where these directors and officers will be in
direct competition with the Company.

Conflicts, if any, will be dealt with in accordance with the relevant provisions of the Business Corporations Act (British Columbia). Some of the Company’s directors and officers are or may become directors or officers of other companies
engaged in other business ventures.

In order to avoid potential conflicts of interest which may arise between the directors’ and officers’ duties to the Company and their duties to other companies, the Company’s directors and officers have agreed to the following:

| | participation in other business ventures will be allocated on the basis of prudent business judgement and the relative financial abilities and needs of the companies to participate;                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | no commissions or other extraordinary consideration will be paid to such directors and officers; and                                                                                                                                                
| | business opportunities arising through other companies in which such directors and officers are involved will not be offered to the Company except on the same or better terms than the basis on which they are offered to third party participants.

In addition, the Company’s Corporate Governance and Nominating Committee has developed, and its board of directors has adopted, guidelines which require all directors to disclose all conflicts of interest and potential conflicts of interest to
the Company.

The Company may pursue strategic transactions in the future, which could be difficult to implement, disrupt its business or change its business profile significantly.

The Company will continue to consider opportunistic strategic transactions, which could involve acquisitions or dispositions of assets. Any future strategic transaction could involve numerous risks, including:

| | potential disruption of the Company’s ongoing business and distraction of management;                                                                                                              
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | difficulty integrating acquired businesses or segregating assets to be disposed of;                                                                                                                
| | exposure to unknown and/or contingent or other liabilities, including litigation arising in connection with the acquisition, disposition and/or against any businesses the Company may acquire; and
| | changing the Company’s business profile in ways that could have unintended consequences.                                                                                                           

If the Company enters into significant strategic transactions in the future, related accounting charges may affect its financial condition and results of operations, particularly in the case of any acquisitions. In addition, the financing of any
significant acquisition may result in changes in its capital structure, including the incurrence of additional indebtedness.

Conversely, any material disposition could reduce its indebtedness or require the amendment or refinancing of a portion of its outstanding indebtedness. The Company may not be successful in addressing these risks or any other problems encountered in
connection with any strategic transactions.

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

Risk Factors Relating to the Company’s Common Shares

The Company does not intend to pay dividends for the foreseeable future.

The Company has never declared or paid any cash dividends on the Company’s common shares and does not intend to pay any cash dividends in the foreseeable future. The Company anticipates that it will retain all of its future earnings for use in
the development of its business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of the Company’s board of directors. In addition, from time to time the Company may enter into
agreements that restrict its ability to pay dividends.

The price of the Company’s common shares may be volatile.

The trading price of the Company’s common shares has been and may continue to be subject to material fluctuations and may increase or decrease in response to a number of events and factors, including:

| | changes in the market price of the commodities the Company sells and purchases, particularly gold and silver;               
|- | ----------------------------------------------------------------------------------------------------------------------------
| | current events affecting the economic situation and exchange rates in Canada, the United States, Mexico and internationally;
| | changes in financial estimates and recommendations by securities analysts;                                                  
| | acquisitions and financings;                                                                                                
| | quarterly variations in operating results;                                                                                  
| | the operating and share price performance of other companies that investors may deem comparable;                            
| | the issuance of additional equity securities by the Company or the perception that such issuance may occur; and             
| | purchases or sales of blocks of the Company’s common shares.                                                                

Part of this volatility may also be attributable to the current state of the stock market, in which wide price swings are common. This volatility may adversely affect the prices of the Company’s common shares regardless of the Company’s
operating performance and could cause the market price of the Company’s common shares to decline.

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The Company may issue additional equity securities which may reduce the Company’s earnings per share.

The Company has in the past issued and may continue to issue equity securities to finance its activities, including in order to finance working capital requirements, capital expenditures and acquisitions. If the Company issues additional common
shares, your percentage ownership of the Company will decrease and you may experience dilution in the Company’s earnings per share. Moreover, as the Company’s intention to issue any additional equity securities becomes publicly known,
the common share price may be materially and adversely affected.

If securities analysts or industry analysts downgrade the Company’s common shares, publish negative research or reports, or do not publish reports about the Company’s business, the price of and trading volume of the Company’s
common shares could decline.

The trading market for the Company’s common shares will be influenced by the research and reports that industry or securities analysts publish about the Company, its business and its market. If one or more analysts adversely change their
recommendation regarding the Company’s common shares or its competitors’ securities, the price of the Company’s common shares would likely decline.

If one or more analysts cease covering or fail to regularly publish reports about the Company, it could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline. In addition, the
Company’s common shares price could be adversely affected by negative stories written or broadcast about it.

Holders of the Company’s common shares may experience dilution when outstanding options and warrants are exercised, or as a result of additional securities offerings.

There are a number of outstanding options and warrants pursuant to which additional common shares of the Company may be issued in the future. Exercise of such options and warrants may result in dilution to the Company shareholders. In addition, if
the Company raises additional funds through the sale of equity securities, shareholders may have their investment further diluted.

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

|CAUTIONARY NOTE TO U.S. INVESTORS
|---------------------------------

The Company is subject to the reporting requirements of the applicable Canadian securities laws, and as a result it reports its mineral reserves and resources according to Canadian standards. Canadian reporting requirements for disclosure of mineral
properties are governed by NI 43-101. The definitions of NI 43-101 are adopted from those given by the Canadian Institute of Mining, Metallurgy and Petroleum. U.S. reporting requirements are governed by Industry Guide 7 (“Guide 7”) of
the Securities and Exchange Commission (the “Commission”).

These reporting standards have similar goals in terms of conveying an appropriate level of confidence in the disclosures being reported, but embody different approaches and definitions.

For example, under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve
determination is made. In particular, the Company reports “resources” in accordance with NI 43-101.

While the terms “Mineral Resource,” “Measured Mineral Resource,” “Indicated Mineral Resource” and “Inferred Mineral Resource” are recognized and required by Canadian regulations, they are not defined
terms under standards of the Commission and generally, U.S. companies are not permitted to report resources in documents filed with the Commission. As such, certain information contained in this MD&A concerning descriptions of mineralization and
resources under Canadian standards is not comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the Commission.

In addition, an Inferred Mineral Resource has a great amount of uncertainty as to its existence and as to its economic and legal feasibility, and it cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a
higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies.

It cannot be assumed that all or any part of Measured or Indicated Resources will ever be converted into Mineral Reserves, and it cannot be assumed that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.
In addition, the definitions of “Proven Mineral Reserves” and “Probable Mineral Reserves” under CIM standards differ in certain respects from the standards of the Commission.

|CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
|----------------------------------------------------

Certain statements and information contained in this MD&A and the documents
incorporated by reference in this MD&A constitute forward-looking statements
within the meaning of applicable U.S. securities laws and forward-looking
information within the meaning of applicable Canadian securities laws, which we
refer to collectively as forward-looking statements. Forward-looking
statements are statements and information regarding possible events, conditions
or results of operations that are based upon assumptions about future economic
conditions and courses of action. All statements and information other than
statements of historical fact may be forward-looking statements. In some cases,
forward-looking statements can be identified by the use of words such as seek,
expect, anticipate, budget, plan, estimate, continue, forecast,
intend, believe, predict, potential, target, may, could, would,
might, will and similar words or phrases (including negative variations)
suggesting future outcomes or statements regarding an outlook. Forward-looking
statements in this MD&A and the documents incorporated herein by reference
include, but are not limited to statements and information regarding: the
Company's future mining activities, including mining capacity, recoveries, cash
costs, production and mine life; the Company's reserves and resources estimates;
the Companys exploration and development plans, including anticipated costs and
timing thereof; the Companys plans for growth through exploration activities,
acquisitions or otherwise; and expectations regarding future maintenance and
capital expenditures, working capital requirements, the availability of
financing and future effective tax rates. Such forward-looking statements are
based on a number of material factors and assumptions, including, but not
limited to: that contracted parties provide goods and/or services in a timely
manner, that no unusual geological or technical problems occur, that plant and
equipment function as anticipated and that there is no material adverse change
in the price of gold, costs associated with production or recoveries.
Forward-looking statements involves known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements, or
industry results, to differ materially from those anticipated in such
forward-looking statements.

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|TIMMINS GOLD CORP.                                                          
|----------------------------------------------------------------------------
|Management’s Discussion and Analysis                                        
|For the years ended December 31, 2013 and 2012                              
|(in United States dollars, tabular amounts in thousands, except where noted)

The Company believes the expectations reflected in such forward-looking
statements are reasonable, but no assurance can be given that these expectations
will prove to be correct and you are cautioned not to place undue reliance on
forward-looking statements contained herein.

Some of the risks and other factors which could cause actual results to differ materially from those expressed in the forward-looking statements contained in this MD&A and the documents incorporated herein by reference include, but are not
limited to: risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations; results of initial feasibility, pre-feasibility and feasibility
studies, and the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations; risks relating to possible variations in reserves, resources, grade, planned mining dilution and ore
loss, or recovery rates and changes in project parameters as plans continue to be refined; mining and development risks, including risks related to accidents, equipment breakdowns, labour disputes (including work stoppages and strikes) or other
unanticipated difficulties with or interruptions in exploration and development; the potential for delays in exploration or development activities or the completion of feasibility studies; risks related to the inherent uncertainty of production and
cost estimates and the potential for unexpected costs and expenses; risks related to commodity price and foreign exchange rate fluctuations; the uncertainty of profitability based upon the cyclical nature of the industry in which the Company
operates; risks related to failure to obtain adequate financing on a timely basis and on acceptable terms or delays in obtaining governmental approvals or in the completion of development or construction activities; risks related to environmental
regulation and liability; political and regulatory risks associated with mining and exploration; risks related to the uncertain global economic environment; and other factors contained in the section entitled “Risks and Uncertainties” in
the MD&A for the year ended December 31, 2013.

Although the Company has attempted to identify important factors that could cause actual results or events to differ materially from those described in the forward-looking statements, you are cautioned that this list is not exhaustive and there may
be other factors that the Company has not identified. Furthermore, the Company undertakes no obligation to update or revise any forward-looking statements included in, or incorporated by reference in, this MD&A if these beliefs, estimates and
opinions or other circumstances should change, except as otherwise required by applicable law.

|QUALIFIED PERSON
|----------------

Scientific and technical information contained in this MD&A was reviewed and approved by
Lawrence A. Dick, PhD, P.Geo, a “qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral
Projects.

38

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